Transfer Of Real Estate To A New LLC
Hello! My partner and I have two rental properties, and we are now forming an LLC. We are concerned about PA state transfer tax on real estate, which we hear is pretty steep. We were advised by an attorney to not transfer the existing properties, but to buy future properties in the name of the LLC. However, would this really avoid the tax? And wouldn't this expose us to personal liability on the two properties (which is the point of setting up the LLC in the first place)? Any info that you could give would be much appreciated!
I do not know anything about PA transfer taxes, but we have found that many jurisdictions will still assess the transfer tax even if you are merely transfering/converting the legal ownership into an LLC. Here in California there is an exception if the ownership is still the same. It sounds like you would be assessed a steep transfer tax if you transfer the property into the LLC, so his advice of holding the property as is until you ultimately sell is probably good advice. However, you would still have personal liability on the existing property since it has not been transferred into the LLC. If you have any concern about liability or pending litigation, etc., the transfer tax might we worth it if it protects your assets.
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