I know a couple, husband and wife who have an LLC. They recently “sold” their home they jointly owned to their LLC. The LLC is their own company without any other members or partners. I don’t see the purpose or benefit in doing this, because my understanding of forming an LLC in such a partnership, is that the asset is still yours and you’d still be liable for it. Can this offer any protection against personal creditors if your house is owned by the LLC, even if the husband/wife are the only owners of the LLC? Seems like, for example, you ran into personal debt problems and creditors could also come after the house owned by the LLC, because it’s your company and still your asset.
Are they planning to rent the house? If they are, then putting it in an LLC can be a good idea. But if they’re planning to live there I don’t really see the point.
Renting the house would one advantage.
2nd advantage is they have a lot of other assets it could keep a liability on the house from getting being an liability on other assets. Someone trips on the sidewalk infront of the house. If they sue the LLC would be liable, and depending on how good the LLCs lawyers were vs the other lawyers were they may have to pay only out of the assets of the LLC. In other words they could loose the house but keep other assets.
There are some ways to delay or temporarily stop an active foreclosure that involve deeding it over to an LLC, but it doesn’t sound like that’s what’s happening here.
Also, is it in California? There are some complicated and dubiously legal ways to abuse Proposition 13 to keep property tax locked during a sale, by having the property owned by a shell LLC and shuffling minority owners of the shell multiple times.
Their home is in New Jersey.
I can understand moving a house you own into the assets of a company to protect it, but if you and your spouse own that LLC as a partnership without any other members, I can’t see how that could be considered off limits in a lawsuit, for example. Because if part of your personal assets is you jointly own 100% of a company, then it’s still your asset just like your bank account.
Could this be done for some tax advantage? You move your house into an LLC, and then rent it back to yourself for $1.00 a month and then all expenses for the up-keep of the house are now a business tax deduction for the LLC?
An LLC is not taxed separately like a corporation; it is subject to “pass through taxation,” meaning the members are taxed directly based on their holding in the LLC (rather than the LLC paying its own taxes and the members being taxed only on distributions). So there’s no federal tax advantage, but there might be a state tax advantage.
Rolling the house into an LLC makes sense from a liability perspective, but only if it’s the only asset the LLC holds (or at least rental properties are all it holds). If they have an existing business and they are deeding the house to that LLC, I can’t think of any advantage and can think of a number of disadvantages.
ETA: LLCs memberships are treated a little differently from shares in corporations for debt/judgment collection. You can levy on an LLC member’s interest in the LLC, but it cannot be seized; you just get a lien on future sales.
If you own a house and something happens there at the house and it is in an LLC dome and maintained properly there is some protection. As an example. A visitor going out your front door trips falls and breaks his arm. He trips because there is a fault with the entry way. He can sue and may win a large judgment against the owner of the house. If the owner of the house is a LLC he collects from the LLC assets. If you have been keeping the LLC assets, money, and rules of the LLC the rest of your assets are not liable. That is if “the veil” has not been broken.
You could lose the house in a law suit but the rest of your assets could still be secure.
A very loose example is if you own stock in GM and they get sued and they lose your stock may now be worth less but the rest of your assest are not up for grabs.
Not familiar with all of NJ rules on houses. In my state you can own a house with someone as a joint tenant or in common. The difference being that JT means the survivor gets 100% of the house whereas in common each person has 50% ownership that can be passed on to an heir. Now suppose that the in common option didn’t exist in our state. We could put it into an LLC and my heir would get my 50% of the LLC when I die and thus own 50% of the house.
Typically trusts are used for that sort of thing rather than an LLC. LLCs are really meant for businesses.
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I know that but I can set up an LLC online for $50. Cheaper and easier than setting up a trust. Not the smartest way but it COULD work.