Owning real estate investments can be a benefit to you and your partners. However, your liability can increase if tenants or others are harmed on your property and blame you. If the injured party files a lawsuit against you, your personal assets could be at risk. Forming a limited liability company (LLC) can protect you if the LLC is the legal owner of your property. Using a quitclaim deed will achieve the transfer in ownership between you and your company.
Quitclaim deeds are used to transfer property from one or more persons or entities to others. It gives your ownership in a property to someone else. It does not guarantee that you have a claim in it; but if you do, you are releasing it to the new party. It also does not give a warranty that the property is clear of any liens or other encumbrances, nor does it change the name on your mortgage or release you from the responsibility to continue to make payments.
An LLC is a business entity filed with your secretary of state that protects its owners, called members, from personal liability for company debts or claims. Members can be individuals or entities, and there is no limit to the number allowed. Profit and losses pass through the company to the owners, who report them on their tax returns. In order to take advantage of the limited liability protection of an LLC, your personal and business transactions should be kept separate. When real estate is held by your LLC, then claims resulting from your liability of ownership cannot attach to your personal assets, only those owned by that particular LLC.
Video of the Day
Brought to you by
Related pagestransunion credit card companies law of diminishing marginal product how to calculate holding period return how long does a turbo tax refund take gross income on 1040 can i file late taxes with turbotax apply for itin without tax return pod on checking account wages tips and other compensation definition 60 day late payment credit score salvation army stockton ca what is bah pay rent reporting to credit bureaus wisconsin gambling are nose jobs covered by insurance how to calculate annual returns trustor trustee beneficiary deed of trust journal entry for selling shares unrestricted net assets denver housing lottery series ee bond value uninsured motors w9 taxes slrp army atm walmart money card my compass ga gov login how do you spell stale quit claim deed indiana w4p flexible budgets and performance analysis paying rent upfront tenants in severalty nationsbank corporation 3 seller concession florida resident college tuition free veterans of foreign wars benefits how to find total utility from marginal utility are preschool expenses tax deductible harvard university scholarships for minority students personal cash flow statement definition requirements for nrotc scholarship mortgage grantor renter walk through checklist what is cash value of powerball how to calculate default risk pcm scholarship exam i paid off my car loan where is my title dentists nearby fha form 92544 accrual examples gold card application houston tx tennessee quit claim deed form using prepaid visa on amazon how much can you inherit before tax how much tax do you pay on lotto winnings fixed asset capitalization gaap 24.9 apr credit card affordable christian colleges what is included in agi tenant holdover difference between escrow and principal jersey city medical center charity care cash accounting and accrual accounting difference kp allied health how to activate a vanilla visa gift card online calculate interest rate with present and future value aarp delta dental insurance color guard college scholarships experian phone number human auto loan rates for 650 credit score how long does repossession stay on your credit closing costs on a va loan federal tax on lottery winnings copy of medicaid card check value of us savings bonds secret security clearance bad credit check status of california state tax refund
Simply forming an LLC does not protect you from liability as a result of your ownership in investment real estate. The property title must contain the name of your company. Therefore, you and any other owner, need to complete a quitclaim deed yourselves or through an attorney to transfer the property to your LLC. Jurisdictions may use different forms, but, in general, your quitclaim deed will contain the names of all owners as the grantors and the name of your LLC as the grantee, including a legal description of the property. The owners releasing their interest to the LLC will sign the deed and have it notarized and filed with the city or county recorder's office.
Transferring the name on a title with a quitclaim deed is a permanent transaction unless you can prove that fraud or duress were involved. Normally, it cannot be taken back or undone without another quitclaim deed being completed and filed. Ask your accountant about any tax implications to the transfer and to the formation of the LLC itself. Since your liability is limited to what is owned by the LLC, consider forming one for each property that you own. This is important when you hold title on commercial properties, such as apartments and office buildings, and there is a high volume of people on the premises. In addition to the benefits of your LLC, buy an umbrella liability policy as an added layer of protection against claims of negligence or other fault.