HOW TO TRANSFER TITLE OF PROPERTY FROM LLC TO MYSELF – Deed, Title, and Other Key Considerations
When it comes time to divest an LLC’s real property there are certain procedures that must be follow. We will presume that title was transfer from a member of the LLC, from one who held title in his individual name, and conveyed through a deed of gift. If income was produced from the property during the time it was held by the LLC, the members would have been paying taxes on that income. However, when the property is transferred back to the member that originally transferred the property to the LLC, the gain on the sale will be taxed.
First, the members must hold a meeting of the members and vote to divest, approve the sale to the member and state the terms of the conveyance, such as price, settlement costs, settlement agent and closing date. The members will also approve of the contract of sale. The minutes of the meeting, the resolution and contract must be saved in the corporate books.
Proration of Taxes and Allocation of Closing Costs
Even though the sale may be for zero consideration, taxes and property owner’s association dues should be prorated so that it is clear the taxes and dues were paid by the LLC for the period of ownership. It should also be determined who will pay the closing costs such grantor/grantee taxes. The settlement agent will serve to produce all the necessary documentation to memorialize the financial aspects of the transaction.
Submission of Contract to Settlement / Title Agent
The corporate resolution, contract and corporate bona fides (statement from the State Corporation Commission and Operating Agreement) will be submitted to a title company and its Settlement Agent to begin processing the title search and prepare for closing.
Deed of Gift Created
The Settlement Agent will have the Deed of Gift or Special Warranty Deed prepared, and the settlement statement (in this case the HUD-1 Form can be use) for the closing.
Special Warranty Deed
If instead of a no-consideration transaction, the LLC pays the purchaser any sum of money, a Special Warranty Deed will be prepared. The primary effect of this is the increase in the grantor and grantee taxes. In a for-consideration transaction the recording fees are not be exempt as with a Deed of Gift transaction. Further, the LLC will pay taxes on the gain over the initial acquisition. A tax attorney should be consulted when considering a for-consideration transaction.
On the day of closing, the deed will be executed by the authorized signatory for the LLC, and the related affidavits for tax filings which are required by the settlement will be executed. Once all documents prepared by the title agent have been executed, the deed will be recorded in the land records of the County in which the property is located. If the transaction was for consideration, any proceeds of the sale will be distributed by the Settlement Agent within 48 hours of the time the deed is recorded in the land records.
It is vital for the LLC’s corporate records contain all of the aforementioned documents along with the final closing documents prepared by the Settlement Agent.
Your Virginia Real Estate Lawyers at Fox & Moghul are ready to answer any questions if you have any. Please feel free to call our office to set up a consult.