Which state to form LLC
Posted 25 October 2004 - 03:10 PM
I'm thinking about investing in some rental duplexes/quads in SC. I live in Michigan. I have read your past comments about incorporating (probably not necessary, will still be personally liable for the loans, but gives you liability protection). My first question is, should I incorporate in Michigan or SC? Secondly, any problems acquiring property and then transferring them to the LLC or should I set that up first? And lastly, any timing implications about setting up an LLC (for example, an S-Corp has to be filed by March 15 of the tax year.) Thanks in advance.
Posted 25 October 2004 - 04:05 PM
In other words, an accountant or attorney is better suited to answer them.
Sorry I could not be of help
Posted 02 November 2004 - 06:39 PM
Posted 12 December 2004 - 02:55 PM
I echo some of the other responses - this is a legal/accounting question that should be answered by those familiar with your ownership objectives, tax status and legal questions
2. Secondly, any problems acquiring property and then transferring them to the LLC
Depending on the lender involved, they may require specific organization of the borrowing entity. Some allow you to borrow in your own name, some require a limited liability company and some require a bankruptcy-remote SPE (special purpose entity) with specific organizational structuring. With respect to transferring ownership, this should generally be achievable. Just ensure that this is specifically addressed in the loan documents (the mortgage, in this case.) As an example, I just financed a 37-unit apartment property in Ann Arbor, Michigan for one of my clients. The lender is one of my correspondent life insurance company lenders and the loan closed in the owner's name. Prior to closing to indicated that he will be re-organizing his ownership of this asset into an LLC and we successfuly inserted the following language into the mortgage:
"Borrower may also transfer the Property into a limited liability company provided the individuals that currently hold title own a majority of the limited liability company and upon such transfer execute a Guaranty Agreement whereby they individually, jointly and severally, guaranty the carve-out Obligations as defined in the Promissory Note."
3. And lastly, any timing implications about setting up an LLC (for example, an S-Corp has to be filed by March 15 of the tax year.) Thanks in advance
With respect to setting up an LLC in Michigan - a competent attorney can accomplish the necessary filings within 2 weeks. You will need to confer with an attorney and/or an accountant regarding specific calendar milestones such as the March 15th date you mention for an S-Corp filing.
Regarding transfer to an LLC, here is language we negotiated with one of our lenders for a multi-family
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