Bringing all your properties under one LLC roof

Whether or not you need bank approval to brin properties into your LLC depends on your financing situation.

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)

bank.cr.03.jpg
Ask FSB
Get small-business intelligence from the experts. Here's a chance for YOU to ask your pressing small-business questions, and FSB editors will help you get answers from the appropriate experts.
Your name:
* Your e-mail address:
* Your city:
* Your state:
* Your daytime phone #:
* Your questions:

(FORTUNE Small Business) -- Dear FSB: I own four properties and only one is under an LLC. I would like to get the other three under the same LLC. Will the banks have an issue with this? Will I need to get bank approval?

- Andreas, Ashburn, Va.

Dear Andreas: Whether or not you'll need bank approval depends on whether your properties have an outstanding mortgage.

If the properties in question are not subject to a mortgage, you'll likely be able to bring them under the limited liability company (LLC) without bank approval.

In fact, should a bank hold a mortgage on the property already under the LLC, that bank should be delighted to have three more added, says attorney and partner Edward T. Savage of the international law firm Reed Smith LLP. The transfer would increase the LLC's credit, Savage explains.


If the three properties in question are subject to mortgages, you'll certainly need approval from the corresponding lenders, however.

Why? A transfer of ownership to the LLC would trigger each mortgage's "due on sale" provision, which mandates that the loan becomes due and payable in full upon any sale or transfer of the property in question, Savage says.

Keep in mind that the debt on the property is your obligation, as you are the borrower. From the lender's perspective, by contributing the property to an LLC you are essentially changing ownership of the property, says Washington, D.C.-based attorney Bob Reif of the national law firm Epstein, Becker & Green.

Even if the lender consents to the transfer, it's likely that it would look to you, as the original borrower, to continue to be liable for the debt unless you can show that the LLC is sufficiently credit-worthy to release you from your obligations, Reif says. To top of page

Have you recently transferred properties into your business? What procedure did you follow? Fill us in.

LLC dividends vs. distributions

Growing an LLC

Tax breaks for real-estate losses
To write a note to the editor about this article, click here.

Find Business Answers
or
Ask a Question



Ask a Question



QMy dream is to launch my own business someday. Now that it's time to choose a major, I'm debating if I should major in entrepreneurial studies or major in engineering to acquire a set of skills first. Is majoring in entrepreneurship a good choice? More
Get Answer
- Spate, Orange, Calif.
5 ways retailers are tracking you If you think pesky salespeople are invading your personal space, check out these 5 technologies that are tracking your movements throughout a store. More
Moto X vs. Droid Turbo: Which Droid should you buy? Motorola has made the two best Android smartphones this year. Here's how they stack up. More
My part-time job is a dead end, but it's all I can find CNNMoney profiles 4 of America's 7 million part-time workers unable to find full-time jobs. More

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer.

Morningstar: © 2014 Morningstar, Inc. All Rights Reserved.

Factset: FactSet Research Systems Inc. 2014. All rights reserved.

Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved.

Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor’s Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2014 and/or its affiliates.