property ownership as LLC

[censible]

I am starting an LLC (single member) in WA and wish to purchase real estate. I do also plan to file with IRS to be treated as Corp. If I purchase any real estate as myself - not through LLC, then transfer that property to the LLC using a quick claim, Is this transfer is always subject to the "due on sale" clause of my loan, causing the possiblity of a refinance?

If it is acceptable with my bank that I transfer the property to my LLC, I still have to deal with the excise tax situation of something like 1.78% of the loan amount. If I buy that property through the LLC, the excise tax is no longer an issue, as it is paid by the seller. Is this correct?

Basically I want to know the difference between purchansing real estate myself and transfering it after the fact to my LLC, compared with taking ownership of the property as the LLC from the beginning. Both in regard to tax issues, as well as piercing the veil of the LLC issues.

[HomeGuru]

Originally Posted by censible

I am starting an LLC (single member) in WA and wish to purchase real estate. I do also plan to file with IRS to be treated as Corp.

**A: you are confused. An LLC is not a corporation. Do more research.
**********
If I purchase any real estate as myself - not through LLC, then transfer that property to the LLC using a quick claim,


**A: you are confused. There is no such thing as a quick claim deed.
************
Is this transfer is always subject to the "due on sale" clause of my loan, causing the possiblity of a refinance?

**A: you are confused. Even if you transfer the property to your solely owned LLC, you would still be on as mortgagor. In answer to your question, yes, the LLC transfer would more than likely trigger the due on sale clause.
************

If it is acceptable with my bank that I transfer the property to my LLC, I still have to deal with the excise tax situation of something like 1.78% of the loan amount. If I buy that property through the LLC, the excise tax is no longer an issue, as it is paid by the seller. Is this correct?

**A: no.
***********

Basically I want to know the difference between purchansing real estate myself and transfering it after the fact to my LLC, compared with taking ownership of the property as the LLC from the beginning. Both in regard to tax issues, as well as piercing the veil of the LLC issues.

**A: do more research and consult with a real estate and tax attorney.

[censible]

am starting an LLC (single member) in WA and wish to purchase real estate. I do also plan to file with IRS to be treated as Corp.

**A: you are confused. An LLC is not a corporation. Do more research.
Maybe:
IRS form 8832 is used when LLC wants to be treated as Corp for tax purposes
IRS form 2553 then can be used to file Sub S status - even though LLC

What is a quit claim deed?
All real estate transactions must be in writing. A quit claim deed is one way to transfer real property such as a house, land, or certain mobile homes. The person who transfers the property by selling it or making a gift of it is called the 'Grantor'. The person the property is transferred to is called the 'Grantee'. One of the most important differences between a quit claim deed and other types of deeds is that the Grantor makes no guarantee or promises that the property is free of debt. Another difference is that the Grantor makes no promises that no one else claims to own the property. The quit claim deed says, in effect, that the Grantor is signing over whatever ownership interest he or she may have in the property. It does not even guarantee that the Grantor has any ownership interest at all.

If it is acceptable with my bank that I transfer the property to my LLC, I still have to deal with the excise tax situation of something like 1.78% of the loan amount. If I buy that property through the LLC, the excise tax is no longer an issue, as it is paid by the seller. Is this correct?

No - is not much of an asnwer. Is it true that every real estate sale is subject to REET, which is paid by seller?

[HomeGuru]

Originally Posted by censible

am starting an LLC (single member) in WA and wish to purchase real estate. I do also plan to file with IRS to be treated as Corp.

**A: you are confused. An LLC is not a corporation. Do more research.
Maybe:
IRS form 8832 is used when LLC wants to be treated as Corp for tax purposes
IRS form 2553 then can be used to file Sub S status - even though LLC

HomeGuru: the legal entity of an LLC is not a corporation although the IRS allows similar treatment for tax purposes.
*************

What is a quit claim deed?
All real estate transactions must be in writing. A quit claim deed is one way to transfer real property such as a house, land, or certain mobile homes. The person who transfers the property by selling it or making a gift of it is called the 'Grantor'. The person the property is transferred to is called the 'Grantee'. One of the most important differences between a quit claim deed and other types of deeds is that the Grantor makes no guarantee or promises that the property is free of debt. Another difference is that the Grantor makes no promises that no one else claims to own the property. The quit claim deed says, in effect, that the Grantor is signing over whatever ownership interest he or she may have in the property. It does not even guarantee that the Grantor has any ownership interest at all.

**A: thanks for the definition. Read my post again and yours.

**************

If it is acceptable with my bank that I transfer the property to my LLC, I still have to deal with the excise tax situation of something like 1.78% of the loan amount. If I buy that property through the LLC, the excise tax is no longer an issue, as it is paid by the seller. Is this correct?

No - is not much of an asnwer. Is it true that every real estate sale is subject to REET, which is paid by seller?

**A: no**************....it is not true.

[Rhubarb297]

Originally Posted by censible

I am starting an LLC (single member) in WA and wish to purchase real estate. I do also plan to file with IRS to be treated as Corp. If I purchase any real estate as myself - not through LLC, then transfer that property to the LLC using a quick claim, Is this transfer is always subject to the "due on sale" clause of my loan, causing the possiblity of a refinance?

If it is acceptable with my bank that I transfer the property to my LLC, I still have to deal with the excise tax situation of something like 1.78% of the loan amount. If I buy that property through the LLC, the excise tax is no longer an issue, as it is paid by the seller. Is this correct?

Basically I want to know the difference between purchansing real estate myself and transfering it after the fact to my LLC, compared with taking ownership of the property as the LLC from the beginning. Both in regard to tax issues, as well as piercing the veil of the LLC issues.

I can only speak to Indiana law. Yours may differ.

First of all, an LLC is not a corporation. "LLC" means limited liability company. People often think the "C" in LLC stands for corporation. It doesn't.

As far as deeding the property out after closing, that's perfectly okay in Indiana. We do it all the time at the title company. You're still personally on the note and on the mortgage. Some states I do believe though take a different approach, especially, I imagine, those states that utilize, a "deed of trust" in lieu of a mortgage.

I don't know about the excise tax question. We don't have that excise tax here in Indiana. But sellers do pay capital gains or income tax under certain circumstances. But why would the buyer be taxed? And why would one pay tax on a loan?

The advice of HomeGuru is good. You might want to consult with a real estate attorney and accountant.

[splib]

Originally Posted by Rhubarb297

I can only speak to Indiana law.

As far as deeding the property out after closing, that's perfectly okay in Indiana. We do it all the time at the title company. You're still personally on the note and on the mortgage. Some states I do believe though take a different approach, especially, I imagine, those states that utilize, a "deed of trust" in lieu of a mortgage.

So, Its done in indiana?
You can deed a property out to an LLC or even a trust after closing?
Does indiana have Blind Trust? (if there is such a thing?)

Sorry to jump in on your thread censible but at least my comments are still on topic

[sullaw]

I often experience lender reluctance to waive the "due on sale" clause when transferring real property to a separate legal entity (except in the case of a residence to a revocable trust, which is governed by federal law. You will have to negotiate that with your lender.

I'm curious why you intend to check the box to have your LLC treated as a corporation (double taxation on dividends), unless you will be providing services and want to limit your employment tax cost, or provide yourself with more generous employee benefits. You can also do that with an S Corporation.

The REET is the responsibility of the seller. If you buy it in your own name and then contribute it to the LLC with a quitclaim deed, you should fall within the exemption for IRS non-recognition transactions upon entity formation, especially if you are the sole member of the LLC and even if it is mortgaged. You should consider using a statutory warranty deed so that the LLC would have recourse against your title insurance. If you use a quitclaim deed you should consider buying a rider that would add the LLC as an additional insured on the title policy. Remember that if you ever transfer a controlling interest in the LLC (50% or more) in a single 12 month period, the REET is also triggered on the full value of the real proeprty.

Originally Posted by censible

I am starting an LLC (single member) in WA and wish to purchase real estate. I do also plan to file with IRS to be treated as Corp. If I purchase any real estate as myself - not through LLC, then transfer that property to the LLC using a quick claim, Is this transfer is always subject to the "due on sale" clause of my loan, causing the possiblity of a refinance?

If it is acceptable with my bank that I transfer the property to my LLC, I still have to deal with the excise tax situation of something like 1.78% of the loan amount. If I buy that property through the LLC, the excise tax is no longer an issue, as it is paid by the seller. Is this correct?

Basically I want to know the difference between purchansing real estate myself and transfering it after the fact to my LLC, compared with taking ownership of the property as the LLC from the beginning. Both in regard to tax issues, as well as piercing the veil of the LLC issues.

[pojo2]

You responded to a post almost a year old and I stupidly sit responding to tell you that.

[HomeGuru]

that's ok, the info was good.

[Twoodwork]

Well, several years later I found the post helpful....