Why It’s Not a Good Idea to Sell Your Home to Your LLC

Mixing assets between a company and a personal estate is often not advisable because of the potential to remove the legal protections in place by the limited liability company that can prevent personal liability in injuries and other claims against the owner. However, if the owner still wants to pursue the avenue of sale, he or she should consult a lawyer first.

The Limited Liability Company

The LLC has several options that can protect a business owner and can extend such protections to personal assets when this owner faces liability issues through an injury to a customer or client. However, protections may disappear if the person mixes personal assets with company assets. This is one way to lead to the dissolution of the business or to engage in fraudulent activity. However, it is possible to use the LLC to purchase property that can become useful for personal perks or for living arrangements for members of the LLC such as the owner.

Buying Property through the LLC

Instead of selling a personal home to the LLC, it is usually better to purchase the house through the LLC instead. The LLC has the property listing as the owner rather than the company owner. This provides privacy and can keep the details of where this person lives confidential. The address is not a matter of public record and can shield the person from unwanted attention from company interactions, the public at large and possible creditors that seek to acquire money for debts. Many buyers find that purchasing the property through the LLC is the preferred method.

Protection from a Lawsuit

Another reason why buying the property through the LLC rather than personally is to protect the owner in the event that a lawsuit will occur and attempt to target the personal assets of the business owner. While selling the property through the LLC can provide profits, these usually should not mingle with the company and owner interchangeably. However, through buying the house with the company, the business owner can still have a location separate from the public that has a shield from lawsuit contact. Anyone injured on the property can sue the owner through premises liability if the owner is negligent, but the LLC can still provide some protection in these situations.

Homeowner’s Insurance

There are certain policies that can effectively protect the owner from various lawsuits and issues that can occur on a property. Through purchasing a certain type of premises coverage, the owner can also ensure there is a policy to protect against premises liability issues that may arise. Some of these policies are only available to a company. If the owner sells the property and garners the profits, he or she can break the protections in place that may shield him or her from the lawsuit specifics when a person suffers an injury on the property.

The Double Assets

When the owner of a property sells his or her home to the LLC, this can cause a double asset between the two. The owner of both will receive monetary funds from the LLC directly for the sale of the property and still have the house as his or hers. This can mingle the two in assets and cause problems later. It can also lead to legal complications that the owner may want to avoid. While the owner can avert several legal and tax issues through purchasing through the LLC, he or she can violate both state and federal laws by having his or her LLC buy the property from his or her own estate.

Partners that have some influence in the LLC can also take part with any property that the LLC purchases. This may not remove the power that the owner has over the house, but it can lead to a partner using the building for his or her own purposes as well. The business owner then has little alternative because the house is an LLC property which all partners may have access to and can change. It is important to consider all aspects of this type of sale before following through with it.

Legal Support for Property Sales and the LLC

The owner of a house should consider contacting a lawyer before purchasing or selling property with the LLC. There are certain considerations that the owner may not know or become aware of until the lawyer points them out. The legal professional may also need to take steps to protect the owner from legal violations.

Provided by HG.org