LLC With A Land Trust
Ok after reading some posts I just wanted something to be cleared up.
My brother and I bought a property using our personal credit. To protect ourselves do we want to transfer the property to a Land Trust and make the LLC the beneficiary.
Will that take the property out of our names and enable us to buy another property with our personal credit without having the first property on our credit sheet? Since this is a new LLC I'm not sure if we can get a loan in the LLC yet or not?
If the property is in a land trust and we go to sell it does the money sit in the land trust or does it go to the LLC to be taxed as income?
Yes, convey title to the trustee of your trust with the LLC as the beneficiary. The role and duties of the trustee can be carried out by a living person(s), by another trust, or by any other corporate entity.
No, having title out of your name(s) does not absolve you personally for any financing you obtained with your own credit. However, if the property is generating a positive cash flow you can show that as income which will affect your debt-to-income ratio and help you qualify for another loan. Start a small credit line with a local, non-national bank or credit union and start building a credit history.
Your land trust is designed to hold title to real property. Cash is personal property and will not go into the trust. The beneficiary (LLC) will be taxed when you sell for profit. Talk to a CPA about this matter sooner rather than later.
Thank you for your advice and clearing that up.
Note that the land trust is merely a title holding device and has nothing to do with your loan. You may (might) get a loan to a land trust or a new business entity by personal guaranty, but that will still show up on your credit report (and it disables your ability to pass on beneficiary interest and tax benefits to another without a due on sale violation)..
And (important) do not be your own trustee if you are planning to hold the property for any length of time (re. defeat of the trust, and merger of title issues).
Also, despite what many think, in virtually all jurisdictions a corporate trustee must be a chartered trust co. (title and trust, bank and trust, etc.) or be a non-profit corporation functioning as trustee of the assets of its members. It could also be your own corporation, but in a court of law, the merger of title issue comes into play for there being no separation of title interest (merger) unless you are not an officer. And when that happens, virtually all the benefits of the land trust are invalidated.
BillG