Can My Business Buy a House Under an LLC?

by | May 16, 2022 | Home Buying

Yes – your business can buy a house under an LLC.

There is no doubt about it – real estate can be a great investment but there are several factors you need to consider before making your purchase.

In this post, we will discuss those factors and provide some tips on how to get started if you decide that buying a property is the right move for your business.

What is an LLC and why does my business need one?

An LLC, or Limited Liability Company, is a business structure that offers personal liability protection and tax advantages. LLCs are popular among small business owners because they are easy to set up and require less paperwork than other types of businesses.

LLCs offer flexibility in how the business is managed and taxed. For example, an LLC can be taxed as a sole proprietorship, partnership, or corporation. LLCs can also have multiple members, who can each own a different percentage of the business.

The main advantage of an LLC is that it shields business owners from personal liability for debts and losses incurred by the company. This means that if the LLC is sued or goes bankrupt, creditors can only go after the assets of the business, not the personal assets of the owners.

This protection is not available to sole proprietorships or partnerships. Another advantage of an LLC is that it allows business owners to choose how they want the business to be taxed.

As a result, LLCs offer both personal liability protection and tax advantages, making them a popular choice for small business owners.

business man signing house buying documents

What are the benefits of buying a house under my business LLC?

When you buy a house, there are many things to consider. Location, size, price, and whether or not the property is held under an LLC. So what are the advantages of buying a house under an LLC? 

Personal asset protection

An LLC can help to shield your personal assets in the event that something goes wrong with the business. Limited liability means that the owners are not personally responsible for the debts and obligations of the company. This protects them from losing their personal assets if the business fails.

Tax benefits

One of the biggest tax benefits of buying a home under an LLC is that you can deduct the interest on your mortgage. This can add up to big savings come tax time. You can also deduct property taxes and other ownership expenses.

Another advantage of buying a home under an LLC is that your personal liability is limited. If someone were to sue you over an accident that occurred on the property, your LLC would be the one on the hook, not you personally.

This can provide valuable peace of mind. As you can see, there are some significant tax benefits to buying a home under an LLC. If you are considering purchasing a property, it’s definitely worth looking into this option.

Privacy

An LLC can help to keep your personal information private. When you buy a home under an LLC, your name won’t be on public record. That can help to keep your address and other personal information safe from prying eyes.

So if privacy is a priority for you, buying a home under an LLC may be a great option.

The disadvantages of buying a house under an LLC?

While there are many advantages to buying a house under an LLC, there are also some disadvantages to consider.

Difficulty with mortgage approval

One potential downside is that it can be more difficult to get a mortgage if you’re buying the property under an LLC. Lenders may be hesitant to loan money to an LLC because it’s a less traditional ownership structure, and they may be concerned about the potential for fraud.

Difficulty selling property

Buying a property under an LLC can also complicate the selling process. If you decide to sell your house, you’ll need to transfer the ownership of the LLC, which can be a time-consuming and expensive process.

Finally, it’s important to remember that an LLC is a separate legal entity from you, which means that you’ll be responsible for paying taxes on the property as well as any repairs or renovations that you make.

No Preferential Capital Gains

Preferential capital gains treatment is a form of taxation that allows certain types of investment income to be taxed at a lower rate than other forms of income.

If you hold your property in an LLC, you will give up the preferential capital gains treatment that is available to individual investors. When you sell a property that you have held in your individual name for over a year, you will be taxed at the long-term capital gains rate, which is lower than the ordinary income tax rate.

However, if you sell a property that is held in an LLC, you will be taxed at the ordinary income tax rate.

Who can buy a house with an LLC?

In order to qualify, you must be an active member of the LLC and have a vested interest in the property. Additionally, the property must be used for business purposes only.

Final thoughts

If you’re thinking of buying a property, an LLC can be a great way to protect your personal assets and take advantage of some valuable tax benefits. However, there are also some potential downsides to consider before making your decision. Ultimately, it’s important to weigh all of the pros and cons before deciding whether or not an LLC is right for you.

Learn more about selling your house with our other resources:

  1. Cash home buyers by HomeBeacon
  2. 3 Most Common Types of Home Sales You Need To Know
  3. Selling Property with Multiple Owners

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