Many people purchase real estate under an individual’s name, but this can result in personal liability being extended to the property in the event that the property is subject to liens and/or judgments.
Instead, avoid personal liability by placing your property into an LLC. This alternative is a great way to protect your assets, avoid liability for possible lawsuits and even take advantage of some tax benefits.
Why You Should Transfer Your Property to an LLC
An LLC is a good way to keep some sort of privacy when it comes to public records, such as deeds. But, using an LLC does a lot more than just protect a person’s identity. It also protects personal assets.
“LLC” stands for limited liability company — and that’s exactly what it is. It’s an independent, legal entity through which you can enter into contracts, make payments, own property and so on, thereby avoiding personal liability. An LLC could also be the landlord or owner of property, as well as receive rent or other proceeds connected to the property it owns.
Creating an LLC
To set up an LLC, first you need to form it. Do this by filing the Articles of Organization with the New York Department of State Division of Corporations and paying a fee. The newly formed LLC may require a new tax ID in order to open an LLC bank account, which will be used for any holdings or payments that are associated with the LLC.
This separate account is essential in confirming the LLC’s separate legal existence, and is also has to do with the availability of liability protection.
Next, transfer the deed to the LLC. There are a few different types of deeds, each of which contains different warranties regarding title. For instance, a general warranty deed is the best option to ensure the chain of title and guarantee ownership of the property. Conversely, a quitclaim deed does not contain any covenants of title.
Do some research on these different deeds before making any decisions. A real estate attorney may assist you in that regard. Finally, once the deed is signed and recorded, the LLC will be the official title holder.