Added to title,triplex, do I start an LLC?

Question

In short, I will be added to the title of one of our family’s triplex to help oversee the rent and collect the income.

I will be reporting the income of rent on my taxes next year.

Should I start an LLC?

Besides being added to the title with my family member is there anything else I should do to protect myself?

Thank you in advance for your advice and consideration.

Nathan M. · Answer

Hi Vic,

The only advice I can/will give is to talk to a lawyer in your local jurisdiction. An accountant would also be a good idea, as there are many tax rules for the treatment of passive income and partnership income.

The following is all intended to be read hypothetically and not as advice to you specifically:

In a general legal sense (again, not specific to your situation) this is usually a slightly more complicated situation than it might seem. Being added to the title does more to hurt you than protect you. It makes you jointly and severally liable as a property owner. In all likelihood, you are also forming a general partnership with the co-owners of the property, giving you all fiduciary duties to one another.  The purpose of the LLC is to avoid this liability.

Also, where I am at least, you frequently have to pay transfer tax on the value of the property being transferred, depending on the circumstances. For example, if property were in your name, and you transferred the deed to an LLC that you wholly own, you would still have to pay transfer taxes on the value (not price) of the transfer. All that is to say--I would form the LLC first, and add the LLC to the title, not my name, personally.