Full question:
I am considering purchasing a resort condominium in Galveston, Texas for daily/weekly rentals. I have been advised to set up an LLC. I am the only member. I have a pre-approval letter from BOA for the loan in my personal name. The attorney I have said I should get BOA to title it in the LLC name. BOA said they don't do that. I would have to close on the loan personally and if I wanted to, a few days later I could transfer the title to the LLC. I have a few questions. What kind of deed should I use for this transfer? Are there any tax consequences from this transfer? Will I have to buy title insurance twice??
- Category: LLC
- Date:
- State: Texas
Answer:
We cannot give legal advice. The following is not a substitute for the advice of a local attorney. But we hope the information will be useful.
BoA's position is not surprising. A primary purpose of an LLC is to protect the owner (you) from liability for the LLC's debts. If BoA loaned money to the LLC, they could only pursue the LLC's assets in case of default, not your personal assets. Therefore, BoA only loans to you personally.
A simple quit-claim deed is likely sufficient to transfer the property to the LLC. Another main purpose of an LLC is to avoid double taxation that traditional corporations face. Typically, an LLC's income isn't taxed at the entity level; instead, it is taxed as personal income when distributed to the owners. For detailed tax implications of the property transfer, consult a tax specialist.
It is unclear if you will need to purchase title insurance again after the transfer. You might avoid this issue by leasing the property to the LLC instead of transferring ownership. Leasing could also simplify tax matters. Again, this is a question for a tax specialist.
These suggestions should be run by your local attorney.
This content is for informational purposes only and is not legal advice. Legal statutes mentioned reflect the law at the time the content was written and may no longer be current. Always verify the latest version of the law before relying on it.