Me and my 3 Pals.... trust or LLC

We have purchased an investment property under one persons name and would like to move the property under all 3 would it be best to put our first property under a land trust that is assigned to all 3 or an llc. Thanks…

What is it you want to accomplish? Each method has its own benefits and disadvantages. Unless the other 2 are contributing to the deal in a meaningful way, simply including you two as owners creates a gift tax concern.

it’s more important that you have some sort of written agreement in place that details exactly who will contribute what, perform what, compensation to be paid, how profits and losses will be split, etc.

too many times one person is reimbursed for time spent “managing” a project, which then makes no profit leaving the other partner, who contributed capital or carried the debt, with no gain from the deal.

mixing friends and business usually results in the loss of one or the other.

Well the whole Ideal is to get house into all of our names then purchase other investment properties. But since we only have one house I was thinking a simple land trust would work then we could add other properties under the trust. I have read a few thing on trust and LLC being useful and the LLC is more for security but you lose your tax credits and should only be use for multiple properties. We do have a business agreement sign and notarise all ready but had to do some special financing on a great deal and was only able to do the financing under one person… Now we have done the work on the house and have a tenant in the house just looking for the best way to move forward… Any suggestion would be great … Thanks in advance…

  1. I don’t know what tax credits you are expecting that you’d lose; business expenses are always deductible.

  2. you’ve already got a written agreement in place. easiest to treat it as a partnership for tax. no formal entity required.

2a. biggest problem is that the 1098 will come in one partner’s name. This is easily remedied.

  1. one individual has already purchased the property. kinda late to be thinking about a strategy.

  2. If you are committed to putting the property in an entity, LLC would probably be the most straightforward. Beware DOSC.

Well it would ultimately depend on what you all equitably agree to in the transaction.

I would actually do both and no legal advice intended.
YOu can create the LLC and assign a % of beneficial interest to the LLC… now it would be redundant to assign interest to a party then to have the same party representated as a member in the LLC you wish to have a arm’s length transaction in how it is structured…
You can use a series LLC setup as well if you are business partners and a estate planning or entity planning attorney can help in that area.

IMO the person the loan should have the higher % of assigned interest in the land trust, since they are responsbile for the debt on the property and with land trusts you can setup equity share arrangement on a per property basis so no exclusive deals are needed.

For prudent asset protection setup your LLC and assign a % of beneficial interest in the land trust to that LLC and that also avoids your DOSC that Mark referred to.

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