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Benefits of Transferring Real Property Into a Florida LLC

While real estate is an excellent investment in 2024, being personally responsible for the liabilities of your property can be a turn-off from ownership. Luckily, establishing an LLC and transferring real property into it can help you reap the benefits of the investment with minimal personal risk.

Here, we’re going to discuss the benefits of transferring property into an LLC. Read on to learn how legal professionals can help you avoid liability, collect tax benefits, and protect your privacy.

Protecting Yourself Against Liabilities

Those who own real estate, specifically investment properties, are personally liable for any debts and obligations that the property accrues.

Creating an LLC and transferring this property into it means that you’re making an entity that’s completely independent of you. The LLC is something that you own, but it does not own your personal assets.

The main appeal of a limited liability company (LLC) is that your debts and obligations are only relevant to the LLC business entity. The owner will not personally be held responsible for the LLC’s liabilities.

This includes both direct and indirect liability, so the owner will be personally unaffected by the LLC’s problems.

This means that as an LLC owner, you will not:

  • Need to pay back business debts out of pocket
  • Worry about bank or property liens on personal property
  • Contend with credit score hits because of your LLC’s obligations
  • Deal with wage garnishment if the LLC fails to pay back debts
  • Be responsible for lawsuits charged against your property

Managers and employees will not be held individually responsible.

This is critical because tenants and guests can create issues on the property that aren’t related to you. Holding the LLC responsible means separating yourself from legal issues stemming from this misconduct. If a tenant or trespasser ruins something, the debt will not be attached to you.

The other assets that you personally hold are not exposed, which keeps them safe.

Transferring property to a Florida limited liability company therefore protects other assets that you, the property owner, hold.

Tax Benefits and Flexibility

As a property owner attempting to minimize liability, you likely will put real estate into a “sole proprietor LLC.” You also may put them into an LLC alongside a married spouse, in which case the LLC will be treated like a sole partnership by the IRS.

A sole proprietor LLC is a “disregarded entity” for federal tax purposes. The LLC does not need to file a separate tax return from the individual despite their lack of liability for the LLC’s obligations.

This makes the filing process easier, especially because the LLC doesn’t need to get its own employer identification number.

However, all LLCs have a lot of flexibility because they can opt into being taxed as a C-corporation or an S-corporation. This means filing a Form 2553 with the IRS in addition to your personal taxes. Owners have multiple options available and can select the best option for them.

Owner Anonymity

Many real property owners want to separate their investments from other areas of their lives. However, this is not possible when public records list you as the owner.

An LLC ensures that you can keep your identity and personal information private. This is because the name of the LLC will go on the public record instead of your name. After all, the LLC you own the property-you aren’t directly affiliated with it as an individual.

LLCs also can stop their addresses from appearing on public records. Entities have the option of using a registered agent service that serves as a publicly-listed address. Legal documents will go to this address before being forwarded to you, which separates you even further from liabilities.

Control Over Assets

Many property owners hear that they won’t be affiliated with the LLC and immediately think they’ll lose control over their assets. This belief may strengthen when you hear that you won’t be listed on the public record as owning the property.

However, these facts don’t matter when it comes to controlling your real assets. This is because you’re the owner of the LLC that the property is held by. You still have control over this LLC because it belongs to you.

This can be challenging to understand because it’s technical and pedantic. However, the legalities are important enough that it’s critical to gain a thorough understanding of them. Enlist an experienced attorney to explain how owners control property within an LLC vs. personal assets that are tied to them.

Easier Estate Planning

Using LLCs for estate planning reasons is far simpler than alternatives. This is because the LLC can easily use its tax planning structure and control over assets to:

  • Consolidate wealth within the LLC
  • Stop unauthorized transfers
  • Combine fractional interests (where multiple parties own different percentages of the LLC)
  • Make business planning/investing easier

LLCs are also great for those who have bigger assets that are taxable. When partial interests in an LLC are sold or given away, tax benefits are generally available. The beneficiary won’t be forced to pay unnecessary taxes upon the transfer of property, making it a far smoother process.

Transferring property into an LLC may also eliminate the need for probate. An owner can create transfer-on-death provisions for a Florida LLC they own. The recipient can then collect it immediately upon automatic legal transfer.

They won’t need to undergo the probate process and work with a court to collect their inheritance. This saves time and stress while reducing the likelihood of an inheritance dispute. It can also decrease costs for beneficiaries since they won’t need to pay court fees or probate-related taxes.

Start Transferring Property the Right Way

While transferring property can be challenging, the benefits of putting real estate into an LLC make it well worth the process. Plus, when you work with experienced business and commercial lawyers, it becomes much more straightforward.

Boyer Law Firm’s experts are committed to walking you through the process of putting real property into an LLC structure. We’ll help you with the paperwork of establishing the LLC and complete the property transfer documents you need to fill out. Schedule a consultation with our team to learn how we can assist you.

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