The current owner of record will need to deed over the rental property to the Corporation or LLC. Your loan documents may contain a due on sale clause which may or may not apply in this case, however obtaining the lenders approval should not be a big deal.
A corporation whose income is primarily from rental property is a personal holding corporation. Tax structure for a personal holding corporation is higher than your personal tax rate on ordinary income.
Best to hold rental property in an LLC.
[ Edited by NewKidInTown3 on Date 02/20/2006 ]
Moving a property to your LLC will protect your personal assets, but the property is still partitionable and subject to liens and encumbrances. My suggestion is to place it in a land trust before assigning the interest to your LLC. Your property will be shielded from liens and encumbrances, including IRS liens, and you have total protection.
mtnwizard said: My suggestion is to place it in a land trust before assigning the interest to your LLC. Your property will be shielded from liens and encumbrances, including IRS liens, and you have total protection.
Sir, would you please be kind enough to provide specific sources and details. My research only partially confirms your statement. That is, anyone with a cause against the trust, say a contractor or lender, could still place a lien on the property, but that persons/entities with a cause against you/myself could not file a lien against the property in the trust if an LLC were the beneficial owner (however, the LLC could still be attacked)..
More clarification would be appreciated, thank you in advance.
The current owner of record will need to deed over the rental property to the Corporation or LLC. Your loan documents may contain a due on sale clause which may or may not apply in this case, however obtaining the lenders approval should not be a big deal.
Thanks
A corporation whose income is primarily from rental property is a personal holding corporation. Tax structure for a personal holding corporation is higher than your personal tax rate on ordinary income.
Best to hold rental property in an LLC.
[ Edited by NewKidInTown3 on Date 02/20/2006 ]
Moving a property to your LLC will protect your personal assets, but the property is still partitionable and subject to liens and encumbrances. My suggestion is to place it in a land trust before assigning the interest to your LLC. Your property will be shielded from liens and encumbrances, including IRS liens, and you have total protection.
mtnwizard said: My suggestion is to place it in a land trust before assigning the interest to your LLC. Your property will be shielded from liens and encumbrances, including IRS liens, and you have total protection.
Sir, would you please be kind enough to provide specific sources and details. My research only partially confirms your statement. That is, anyone with a cause against the trust, say a contractor or lender, could still place a lien on the property, but that persons/entities with a cause against you/myself could not file a lien against the property in the trust if an LLC were the beneficial owner (however, the LLC could still be attacked)..
More clarification would be appreciated, thank you in advance.
thanks everybody I always know I can get help here
Or in your operating agreement setout his percentage ownership. This governs his percentage responsibility