Can an LLC Own Vacation Property?

By Marie Murdock

Many people form an LLC to manage their investments or business ventures, choosing to acquire assets in the LLC name. Most, if not all, state statutes provide for real property ownership by LLCs, so unless the company’s own operating agreement prohibits such action, you may form an LLC and acquire vacation property in the company name.

Liability

LLCs are designated as limited liability companies for a reason. They limit the liability you might incur as an individual in a business or venture. For example, if a vacation tenant slips and falls in your condominium, she could sue the condo owner for any compensatory or punitive damages. If you hold title to the condo in the name of your LLC at the time of the accident, any judgment rendered by the court in her favor should, under most circumstances, attach to the assets of the LLC, not your individually-owned home or other properties. In addition, if the LLC incurs debt in its name, the debt will not generally attach to the assets of the individual.

Tax Advantages

Unlike corporations, profits from your investment in an LLC may pass through to your individual tax return, eliminating the need to file a separate return for the company. Therefore, LLCs avoid double-taxation which occurs with some corporate structures. If you own real estate in the name of your LLC, not only will business profits be reflected on your tax return, but business losses from the sale of real estate may be claimed as well.

Ready to start your LLC? Start an LLC Online Now

Limitations

Often, however, if you must borrow money to purchase the vacation property, lenders will refuse to lend money to an LLC. They may require that you hold title to the property as an individual before they will authorize the loan. Even if the lender allows you to purchase the property in the name of the LLC, you may be required to sign a personal guarantee holding you personally liable for any debt not recovered by foreclosure of the property.

Considerations

Although some states allow the formation of sole-member LLCs, they are frequently formed with several members. In the case of a vacation home, immediate family or even close relatives may band together to form the LLC. As with any venture, the more people are involved, the more chance for there to be disagreement related to the operation of the LLC and its assets. It would be wise to have an air-tight operating agreement establishing the rules and regulations of the LLC as well as the responsibility of its individual members.

Ready to start your LLC? Start an LLC Online Now
How to Buy Properties Using a LLC
 

References

Resources

Related articles

Divorce Laws on Mortgage Loans in Ohio

When you end your marriage in Ohio, you and your spouse have the option of reaching your own agreement about how to divide your marital property or you can have the court decide these issues for you. Either way, your divorce should decide which of you will keep the house -- but the court cannot order your lender to take your name off the loan.

How to Transfer Assets to an LLC

Transferring assets to an LLC, or limited liability company, is not as difficult as you may think. Even though there may be legal or procedural differences between them, an LLC is an entity that may acquire property in the same manner as a corporation or limited partnership. A corporation consists of officers and a board of directions, a limited partnership consists of general and limited partners, while a limited liability company is comprised of a member or members and sometimes a manager. The method for transferring assets into the various entities is essentially the same.

Can an LLC Own Another LLC?

Ownership of an LLC vests in the members. Almost all states allow single-member LLCs, although many professionals advise against this type of business structure since LLCs were originally created to function as partnerships. If you already transact business as an LLC, you may choose to have your LLC become a member or part-owner of another LLC for specific investment purposes.

LLCs, Corporations, Patents, Attorney Help LLCs

Related articles

How to Use an LLC for Vehicle Ownership

A limited liability company, or an LLC, is a business structure that protects the owners, or members, from liability ...

Can You Form a LLC With Your Multi-family Property?

Starting a business is an exciting undertaking. There are many things to consider when creating a new business, ...

How to Set Up an LLC to Buy an Apartment to Rent out

A limited liability company, or LLC, is one type of business structure available to your rental business. Although you ...

How to Transfer a Deed to an LLC

People often form an LLC or limited liability company to protect their personal assets from attachment. If you own ...

Browse by category
Ready to Begin? GET STARTED