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I am thinking of transferring/deeding the title of my rental property to my company. The owners of the property and the owners of the company are the same. The property is all paid off. I am not sure how to hold a title of a property in a company. I mean, should the company hold it jointly, tenancy, or what?
What are the advantages or disadvantages to hold a rental property in a company? I can only think of liability reasons.
My friend told me that I can save some taxes if I transfer the title to a company. Does anyone know what it can be? (I will check with my CPA next week but I want to have some clues before I talk to the money guy!)
Does it create more problems when I try to sell the property if the title is held under a company?
You will have trouble taking equity out of it as the lenders want to have someone personally liable.
Do check with CPA regarding possible company tax. You will probably need to file separately in the company name.
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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In CA, A corporation must have a board of directors meeting and a resolution to buy or sell property. This would also trigger a Prop 13 taxable event (this may not apply to your situation) which would allow the assessor to increase the valuation on the property to the current market value.
I have a friend who buys everything in a Delaware LLC and then he can segregate each property into a sequential LLC without having to file new papers with each property. XYZ 1 LLC, XYZ 2 LLC, XYZ 3 LLc etc;
It gets a bit complex as your corporation is going to have to file returns for each property as any income generated flows to you individually.
DMenscha comments on LLC echo my own experience -- you need a tax plan AND a way to isolate the downsides if something goes wrong. Way beyond what you can do on your own unless you have a lot of experience with accounting / legal filing..
The directors of the company are OK to buy the property because it's the same owners.
The reassessment probably won't occur because it's the owners deeding the property to themselves. If reassessed, it's OK because the property value has dropped significantly.
Filing income tax is OK because the income of the property has been on the company's book for many years.
So how to hold the title? I am using S corporation, not LLC to hold the title.
Just "XYZ" corporation holds the title? It sounds a bit too simple.
Yep...Just XYZ corp holds the title. This is how banks hold title to homes. When you go to sell it the title company will just want verification of company documents to ensure that you have authority to sign and sell the paperwork.
The people I've dealt with left the property seperate from the company. They then charge a higher but not outrageous rent which is a way of pulling profits out of the company without the taxation. Being Sub S you pay out the profits anyway.
Most of the really wealthy I've seen have a corporation for their property holdings if substantial to reduce liability. If it's just a piece or 3 they leave it in their personal name. Either way a good tax man can give the best advice.
The people I've dealt with left the property seperate from the company. They then charge a higher but not outrageous rent which is a way of pulling profits out of the company without the taxation. Being Sub S you pay out the profits anyway.
Most of the really wealthy I've seen have a corporation for their property holdings if substantial to reduce liability. If it's just a piece or 3 they leave it in their personal name. Either way a good tax man can give the best advice.
Quite a few of my contractor friends do not draw a salary... they rent property they own to their business... number of tax advantages doing this.
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