Hey folks, Matt Horwitz, LLCUniversity.com.
Hope you're doing well.
Can I use an LLC for my personal residence?
One of our readers writes in: "Hi, the personal assets I have are our bank accounts, a house,
and brokerage accounts.
How can I protect that from lawsuits if someone gets hurt on my property?
Thanks, Gary."
Alright, here's the answer Gary.
First, I recommend reviewing your insurance policies.
That's going to provide some coverage in the event of a lawsuit.
Second, to get the full liability protection, you're going to need to transfer your house
to the LLC.
The LLC must own the property in order for it to provide personal asset protection.
Just having your house, which is owned by you, and a separate LLC; that does not create
any asset protection.
"I created an offer protection…"
I just noticed a typo in our on our page.
I've made another video on this which goes into far more details.
I'll link that below.
In your case Gary, since you already own the property in your personal name, again, you're
gonna to need to transfer the house from your name to the name of your LLC.
Think of it as a basically a sale of a property, but instead of selling it to somebody else,
you are going to transfer it (or sell it) for a dollar from yourself to your LLC.
You're going to need to contact a real estate title company to see how to transfer the deed.
It'll most likely be what's called a dollar deed or a dollar sale.
There's different types of deeds, depending on your county, city, state, etc.
But here are some things to keep in mind.
You're likely going to incur a transfer tax.
A real estate transfer tax because of the sale of the property.
Now, sometimes that tax is greatly reduced when you are transferring it in the dollar
sale, the dollar deed, but please, you need to check on that.
If you have a mortgage, that could prevent the sale or the transfer in this case.
More on that in just a second.
And you'll likely need to re-register all of your utilities.
You basically need to kind of re-register everything that's owning your personal name
that's associated with the property into the name of the LLC, so that LLC owns that asset
and everything that is encompassed in that business.
And you'll likely need to get new insurance because your existing homeowners insurance
policies are in your personal name and they're not in the LLC.
And if you're getting insurance in the name of the LLC, it most likely is not going to
be a homeowner's policy, but do check with your insurance carrier or broker to double-check
on that as the variation...
as there's a lot of variation than that area.
So here's your recommended action list.
Number one, call a title company to check on transfer tax, any miscellaneous closing
costs, fees, and what actually needs to happen.
You should also contact your tax professional to ensure there's no negative tax consequences
of this.
I don't know your exact situation, but something like this, people just think, "Oh, just form
an LLC and that'll protects my assets."
No, that's that's definitely not the case, especially with real estate and there's just
so much detail involved here, definitely check with your tax professional make sure...
I'm repeating myself.
Anyway, check with your tax professional.
And you also want to review your mortgage.
If you're not sure you can just call your your broker, your banker, or ideally wherever
the the loan is, because you may have what's called a "due on sale" clause.
What that means is that if you purchased a property that has a mortgage and you sell
it, it immediately causes in the mortgage "due on sale", which means basically the balance
of the mortgage becomes due as soon as you sell the property, so that's a big no-no you
want to check on that.
Again, read your mortgage or call the bank.
And on top of asking about the "due on sale" clause, I would also check with your bank
about just, "Hey, here's what I want to do.
I want to transfer from my name to my LLC."
All banks operate differently...
different, all the states are different, cities, counties, etc.
And if you're not a 100% sure of any of this, I would definitely contact a local lawyer.
So that's your answer to "Can I use an LLC for my personal residence."
And if you're watching this video before you bought any real estate or any property, you
want to form the LLC before you purchase your home…
for the LLC before you purchase a real estate, so that when you're buying the real estate,
it's not you, it's the LLC buys the real estate.
Alright, I hope this video is helpful for you.