There’s a property (raw land) seller in MD who explained that we could buy the LLC membership for the property and eliminate closing costs. I understand the logic behind this process, but I’m not quite understanding of how it exactly works.
The general understanding that I have of this process is as follows…(example) I own a piece of land on Green St under the LLC of Green St LLC. When I go to sell the property, I tansfer the membership of the LLC to the new owner and eliminate closing costs.
Can someone please varify the validity of this example and elaborate on the process. Thank you.
One drawback is when you buy the company you will also buy their debt, judgments and lawsuits or potential lawsuits. You will get no title insurance to protect against this either. I do not know how to protect yourself completely against this either. The major closing costs is the title policy. I wish I know more and could help you further.
You do not eliminate all of the closing costs - just the document stamp taxes on the property because you are not conveying the property or transferring it in any way. The LLC will still own the property. You will then own the LLC. The taxes are the biggest closing expense generally so this can be a significant savings. Eventually if you wish to transfer the property out of the LLC, you will have to pay the transfer taxes.
The title insurance remains intact because the property is not conveyed.
I have clients that take advantage of this because of the significant savings factor. You can limit your liability of the company with the right documents in the takeover. Seek professional help from an attorney in your area.