How to Pull fund out from LLC after Refinance

Question

Hi,

I have accumulated several single family houses in Indianapolis and was thinking about refinance and move them from my name to LLC. Assuming I was about the do a cash-out refinance using a portfolio loan, the fund will go into the business bank account of the LLC.  My question is, If I move the money from the business account to my personal account ( so that I can buy/finance with my name again), would that introduce complication when filing tax return?

What's the best way to move money and buy again? Thank you!

Andrew Postell · Answer

@Aries Li this is the BRRRR Method forum. This forum tackles strategies with the BRRRR Method, how to acquire properties, financing, etc. Your question is more to do with taxes so I would suggest posting in the "Tax" forum. I mean, you have some responses here...but you'll get a lot more over there and probably from a few CPA types of contributors as well. There are several accounting methods that allow you to take a personal loan or a commercial/DSCR loan and fund your company with the monies without co-mingling - however, even that doesn't answer your tax question. It shouldn't have any tax implications when you take a loan no matter what type you take (we pay "Long-Term Capital Gains" taxes when we sell and usually a loan is not considered taxable income) but certainly post in the other forum for clearer information on the details here.

Thanks!

Basit Siddiqi · Answer

If the LLC is a single member LLC, it is considered disregarded for tax purposes.

Evan Polaski · Answer

@Aries Li, the short answer is you can do it.  As noted, commonly a sole-member LLC is disregarded and therefore won't trigger a tax event.  From a liability perspective, you should be consulting with an attorney (and CPA) to be sure any transfer you are doing is not "piercing the corporate veil" and opening you up to personal liability.

But from a moving of money standpoint, you won't have any issues.  I setup my LLC 13 years ago when I bought my first rental.  It is a sole-member LLC, so all money passes right to my personal tax returns.  I move money back and forth from personal accounts to LLC and back fairly often, and after 13 tax returns, have not had a single issue.

John Chong · Answer

Why do you want to move the cashed out funds from your LLC back to your personal account?

You could always buy more properties using your LLC with the DSCR loan.

I would also consult with a tax professional.

Ash Hegde · Answer

For income tax purposes, a single member LLC is disregarded, so contributing or distributing cash would not cause any tax issues.

A lawyer would be best to answer this, but moving properties into an LLC, refinancing, and pulling the money back out to a personal account may limit the liability protection of the LLC.

You are correct that you cannot do a conventional loan in the name of an LLC, if that is your goal then you will need to put the future purchases in your name.

Aries Li · Answer

@Lucas Miles

These properties are owned by myself, but I suppose I will move them all to the LLC when doing the refinance, so that the properties are owned by LLC (sole-owner: myself) and the fund from cash-out refinace goes to LLC. The option I was thinking about is to withdraw money from LLC for my personal investment use.

There is difference when applying loan using my own name vs using LLC. As far as I understand from my loan agents, LLC won't be about to apply for residential loan but have to turn to commercial loan.

Lucas Miles · Answer

@Aries Li if these properties are owned by your personally (not LLC), doing a refinance you wouldn't want to put this refinance $ in a account owned by your LLC, (would probably be considered commingling of funds, you want to keep assets owned by you personally vs your LLC separate). There shouldn't be any difference in terms of refinancing if you own these personally or if your LLC owns these properties. You will more than likely be required to have a personal guarantee on investment properties owned by your LLC as well. The purpose of the LLC is to keep you and your personal assets separate from your LLC's assets in the event of a lawsuit.

How to Pull fund out from LLC after Refinance

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