Transferring Ownership of LLC

19 Replies

Hello ALL.

I am a wholesaler about to make a 6 figure profit in DC.

I do not want to Assign my rights bc then it would show up on the HUD for the Seller to see and might scare him to back out.

I also can not do a double close bc it is illegal in Washington DC and it would cause me to pay 2x DC transfer Taxes, which would add to -25k.

I could use transactional funding, but that would cut into my profit substantially more than double close and would rather not.

The Property is under contract under a random LLC name I created for this deal.

I heard about just selling your LLC rights of ownership, How do I do this and does this normally show up on the HUD statement at closing?

Any Techniques you guys know about would really help.

Much thanks.

Raphael Vargas


Do let greed sit in get transactional funding and closed the deal.

Joe Gore

Greed has never been a part of my Nature...

Thanks for the  Unhelpful Judgemental point of view.

Anybody else want to actually guide me through this proccess of transfering LLC instead of trying to Shine up their Ego?

The Obivious is I will use Trans Funding if  it Cannot be done....

Much Thanks to those who truly understand this subject and can guide me in any way possible.

Your Knowledge is appreciated.

Raphael

I thought about doing something similar at one time and asked my atty if I could sell the LLC just before closing, sort if like a double close. He said yes, I could.

I never did it but it is an arrow in my quill for situations like yours.  Congrats on your deal. 

Thanks Larry.

I'll certainly speak with our Closing attorney tmrw to see if this is a possibility.

Not sure if law regarding this differs between states.

Thanks again. Hope the NY market is Treating you well! 

You said you are making a six figure, and you don't want to pay at the tops $6K or $7K trans funding to make a clean deal. I see wholesalers here in Dallas try to take the whole pie and lose the deal, and then they wonder what went wrong. I wish you the best.


Joe Gore

I heard that your title company should be able to take care of that. Let us know how it goes.

Joe Gore just a thought but often the message is lost in the delivery. I've noticed a few of your posts were helpful but curt and sometimes that doesn't translate well online.

@Elize White  Will do! Keep you posted today.

@Joe Gore Tops 7k??? Can you refer me to your lender?

If it only cost 7k here I would.

1point for Trans lending on a 1.1M dollar deal is 11k.

1.2% for DC Transfer Taxes.is 13,200.

13,200 x 2= 26,400 bc Im doing a "Double Close" "Double Transfer Taxes"

Total Cost not including closing costs are $39,600...

Therefore cutting about 40k out of my profit..

Maybe its just me, But wouldnt you try and find another way to creatively do this while not losing 40k if you could?

And for doing so, not be called Greedy? 

Just my Thoughts...

Thanks to All who helped.

Raphael

In short, you need an attorney if you're totally lost.

You enter the proposed and final sales terms in the minutes and note the buyer.

You need a financial statement and attest to it's accuracy (not required to be done by a CPA) just a representation.

You need a statement stating that there are no other liability or contingent liabilities.

You need a sale agreement, that shows the agreed purchase price, terms, representations and any guarantees made by the seller.

The sale agreement needs to list all assets held, description and valuations.

There is no title to an LLC, no stock certificates, you file the new owner as the new owner/manager and then you resign from management or do a statement of withdrawal and file it with the Sec of State.

At that point the new owner can change the Registered Representative with the state.

You'll need a closing statement showing the accountings of the transaction.

File tax reporting requirements based on the settlement statement.

Update the minutes along the way as tasks are accomplished and hand it over to the new owner.

Close any bank account or assign the accounts.

You'll need a copy of your transaction for your following year's tax returns, not submitted but is a source document.

Now, a reality check, most RE buyers don't understand corporate transfers and title matters, it is difficult to sell that way. The other issue is that a new owner is responsible for anything you did in the business, contingent liabilities, fines, unpaid fees, whatever the debt may be or could be, the new owner takes those on, most folks won't go there. This is an aspect left out by gurus, your buyer needs to be a more sophisticated business person than just a RE buyer, they will often see their attorney at which point the attorney advises them not to buy that way or they get involved doing due diligence complicating your marketing hopes.

Transactional funding is the way to go, IMO.

Originally posted by @Raphael Vargas:

...

The Property is under contract under a random LLC name I created for this deal.

...

So did you actually go to the trouble of forming the LLC and create a formal operating agreement?

If your area handles transfer taxes like the state of PA, a transfer tax is supposed to be paid on the real estate when a business is transferred. I don't know the rules for your area, just offering how the PA Dept of Revenue looks to collect transfer taxes (particularly when real estate transfers are done creatively to circumvent paying transfer tax).

@Bill Gulley yes, We have. Its (Property Address)LLC.

Interesting. According to my title attorney,  a double closing using trans funding will cause me to pay  double Transfer taxes.

But, I havent asked about business transfers.

Will ask today and keep posted.

Thank you all for the Feedback! 

Originally posted by @Bill Gulley:

...

You need a sale agreement, that shows the agreed purchase price, terms, representations and any guarantees made by the seller.

The sale agreement needs to list all assets held, description and valuations.

...

You'll need a closing statement showing the accountings of the transaction.

File tax reporting requirements based on the settlement statement.

...

You'll need a copy of your transaction for your following year's tax returns, not submitted but is a source document.

...

So it appears the end buyer would still be aware of the numbers in the original purchase. 

@Steve Babiak  Yes. He will be fully aware.

What I am trying to avoid is the seller knowing the fee I will be receiving.

If there is another way I can approach this that will cause my fee to be private to the seller please let me know.

Im sure there are, I just haven't found them yet.

Much Appreciated. 

@Raphael Vargas,

A trans lender will not close A to B until your end buyer has 100% of their funds in escrow, and you must put there trans lender fee in escrow upfront, and their fee is due regards if C to D close or not.


Joe Gore

Originally posted by @Steve Babiak:

So it appears the end buyer would still be aware of the numbers in the original purchase. 

Especially if he was truly an experienced business type.

You admit the buyer to the LLC, they are then entitled to audit the books and records of the company from it's inception. That takes place as well prior to anyone being admitted, you can't demand they join before they know what they are joining, they are entitled to perform due diligence as to their liability and contingent liabilities, that includes an "audit" of the books.

Folks have no clue when they are in over their head trying to hide material facts, the stuff the gurus don't teach you. Cooking the books can get you a stay in the big house. So can misrepresentations.

Yes, if you have a windfall coming you need to protect it by seeing a good attorney, good to hear that. 

Pay and trans lender to help, you closed the deal. If it did cost you $25K to close the deal, you still made a good payday, and you can hold your head up high that knowing the buyer will never find out how much you made, but if you try to muddy the waters, then it could backfire on you, and you could walk away with nothing.


Joe Gore

@rafael vargas

Hey Raphael - congrats on the deal. From the numbers, this is a much larger deal than the typical SFR wholesale deals I come across in San Antonio so this advice may not work in your situation. However, if your sole goal is to keep the seller from seeing your profit, the easiest way is to close the deal at a title company that will provide two separate HUDs. Title companies have the option of printing out a Seller HUD, and a Buyer HUD. All the figures are the same on each and the bottom lines are the same as if they were printed as a fully disclosed HUD. The difference is that the Seller HUD only shows the seller's side of the transaction so they have no idea what you have to pay, or if you got a loan, what your loan fees were. The same is true for the buyer's side, you never see how much the seller makes. Therefore, if you tack on a 1/4 mil assignment fee, the seller just see's their bottom line and nothing else matters. Ask your title company if they will do that for you and you have an easy, no cost solution. Again, congrats on a deal like that. I'd be interested in knowing more about it just for the story.

@Randal McLeaird  Randal.....That's Genius!

Very unique way I've never heard before.

I'll surely contact my title company and see if this is a possibility. 

This actually provides a solution to my main concern.

The buyer is well aware of my profit, but the seller Is not.

Much Thanks again Randal.

And yes, I was blessed with controlling a big development project.

Which is actually a Big Multi Fam, we're adding another level, then Condo converting into five 1500sq ft Townhouse style.

I just have the contract to the Multi Fam which Im Marketing with Huge potential for our End buyer. 

Hit those Big Multi fams! 

Shout out from DC

Raphael 

I would second Randal's suggestion. The separate HUD would fit perfectly if the title company is open to doing it. I operate out of PA, and it would be an easy solution as most title company software can accommodate that request.

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