Husband and wife purchased SFH with plan to use as rental. NO MORTGAGE EXISTS. Would like to establish LLC and transfer the property to LLC. 2 questions: Thinking of establishing the LLC as a single member LLC (wife only) to make tax preparation easiest. Any suggestions about this ? Any disadvantages? (We are in Maryland).
- While I don’t think that the transfer from Husband and wife to LLC will trigger a transfer tax scenario, was wondering if anyone has done this in Maryland and can verify. Also, when the transfer form asks for a “consideration amount” what do you put here? (amount you paid for the property? or a minimal amount like I’ve seen $10)? Will either of these amounts affect whether you have to pay transfer tax in Maryland.
Again, there is no mortgage so all the scenarios of a bank calling the loan due to transfer do not exist. Any help/advice would be greatly appreciated. Thanks.
You need to transfer it as a gift.
I suggest you do some reading about single member LLCs. It’s very easy for a lawyer to disregard the entity and go straight for your personal assets if you’re sued. You should also read the posts in the Asset Protection / Legal forum here.
My wife and I have an LLC that is taxed as a partnership. We file a Form 1065 for Partnerships and list everything on our personal tax return.
Thanks for the advice. I’ve done quite a bit of reading regarding setting up an LLC, which I think is causing my head to spin a bit. I’ve also posted this question in the Asset Protection/Legal forum on this site - - thanks for the suggestion.
I am curious though that you say it is easy for a lawyer to disregard the Single Member LLC and go straight for personal assets. Why is that? Is there are reason that the Single Member LLC is more vulnerable to having the “veil pierced” than say a husband and wife LLC?
Also, you said that you have a husband and wife LLC that is taxed as a partnership. Aside from the Form 1065, are you having to fill out numerous schedules? Do you prepare your own taxes? If so, do you find that filing returns for a partnership is manageable or cumbersome? I don’t mean to get too personal with you, I’m just trying to gain as much information as possible from people who have actually gone through this. TIA for your help.
There are lots of articles written about LLCs, piercing the veil of LLCs, etc. Here’s one that has some explanations about the risks of single member LLCs:
I do not prepare my own taxes. I use the program Quickbooks Pro to document the business income/expenses for the year. I take that and other documentation like bank statements to send to my CPA. I wanted to make sure our business properly filed taxes so we use a CPA. I like the peace of mind knowing it is done correctly. There are filings for the two states where we conduct business as well as the federal business filing on the Form 1065. It’s a lot of paper work, but a lot of it is repetition for the different properties.
single member/ multi member won’t change your liability much if you are still personally managing the properties.
it’s not a gift transfer; it’s an equity contribution.
I read that in MD, transfer of rental property from owners to an LLC is not subject to the transfer tax. Source: Maryland Annotated Code §13–207 (a), which references §12–108 (bb)