Good Day…
I’ve spent the morning reading about LLCs and the ability to get financing on investment property. My understanding (correct me if I’m wrong), is most lenders will not loan to an LLC only to an LLC ‘member’.
If I sign for the loan and the property sells, how do I differentiate between profit made as a member of an LLC vs profit made as an individual (if I choose to go it alone on my own once in a while). I can live with paying taxes on profits I make as an individual but I don’t want it to appear that I’m liable for the LLC taxes (since I signed in both instances, once as an LLC member and once as an individual).
Regards
Bean
(I hope I explained this clearly…)
The best advice for you is to run this by your tax professional, as it will be he who is responsible for your taxes.
That said, if the LLC owns the property, then it’s the LLC’s profit when it sells.
Also, LLC’s are normally treated as a pass-thru entity, that is, all income or losses are passed directly to the member(s) (No double taxes). If this is a single member LLC, then by default, you, as the member, will be responsible for all of the income/losses anyway.
Raj
Thanks!
If I sign (even tho I’m a member of an LLC), wouldn’t the lender consider ME (not the LLC) the owner? Based on what I’ve read, the lender doesn’t even want to hear of and LLC owning the property… As far as they’re concerned, I own the property.
How does the tax person know the profit didn’t all go to me (as an individual investor) vs being distributed thru the LLC? I’m assuming that’s the money management part of being an LLC in the first place (right?)
I have easy access to a tax attorney but I THINK she’s licensed in another state. Would that matter?
Regards
Bean
Just one more thing…
Of the 3 of us looking to create an LLC, one has cash on hand for the down (not me). If I was to sign for the loan, can I assume the money needs to be in an account with all our names and the Lender would accept it as account used for VOD?
(We’re interested in 2 properties and I’m in charge of coming up with a plan and options for our venture)
Bean
Your right Lenders consider an LLC loan to be commercial so you want to stay away from that, one thing you can do to get around that is to put it your name and then transfer the property to the LLC as soon as it closes. This way whatever profit is made goes to the LLC taxes and not your personal ones.