What steps are required to transfer real estate into a LLC?
"especially considering it has a mortgage on it (technically a home   equity loan on my primary residence). I'm not following. Does it have a mortgage on it, or your primary residence (a different property) was used as a security for the loan? If it is HELOC from a different property - then it is really your business what to do with it. You can spend it all on casinos in Vegas for all that the bank cares. Is this a complicated transaction? Any gotchas I should be aware of   before embarking on it? Obviously you should talk to an attorney and a tax adviser. But here's my two cents: Don't fall for the ""incorporate in Nevada/Delaware/Wyoming/Some other lie"" trap. You must register in the State where you live, and in the State where the property is. Incorporating in any other State will just add complexity and costs, and will not save you anything whatsoever. 2.1 State Taxes - some States tax LLCs. For example, in California you'll pay at least $800 a year just for the right of doing business. If you live in California or the property is in California - you will pay this if you decide to set up an LLC. 2.2 Income taxes - make sure to not elect to tax your LLC as a corporation. The default for LLC is ""disregarded"" status and it will be taxed for income tax purposes as your person. I.e.: IRS doesn't care and doesn't know about it (and most States, as well). If you actively select to tax it as a corporation (there's such an option) - it will cost you very dearly. So don't, and if someone suggest such a thing to you - run away from that person as fast as you can. Mortgages - it is very hard to get a mortgage when the property is under the LLC. If you already have a mortgage on that property (the property is the one securing the loan) - it may get called once you transfer it into LLC, since from bank's perspective that would be transferring ownership. Local taxes - transferring into LLC may trigger a new tax assessment. If you just bought the property - that will probably not matter much. If it appreciated - you may get hit with higher property taxes. There are also many little things - once you're a LLC and not individual you'll have to open a business bank account, will probably need a new insurance policy, etc etc. These don't add much to costs and are more of an occasional nuisance."
Some businesses sell a franchise. You will be buying the name and reputation, access to the corporate infrastructure, requirements to use specific supplies and procedures. These tend to come with financing from the parent company. You will need to bring cash to the table, but they will loan you the rest. When purchasing a business, like buying a house, what is part of the deal can be negotiated. Sometimes the new owner and the seller agree to transfer everything. In other cases almost nothing except one item is included. The one item could be the location, the name, the inventory, the customer/client list. All these can be assets or liabilities depending on the specific situation, and which side of the table you are on. In the United states the US government has the Small Business Administration. They also have Small Business Development Centers SMDC to help. These are also supported by state governments and colleges and universities. They can help identify the steps needed to start a small business. "I'll answer in general terms, since I'm not familiar with the price ranges in Florida. The LLC formation costs $125 (state fee). In addition you'll need a registered agent. Registered agent could be your CPA/EA/bookkeeper/property manager/local friend, or you can pay firms specializing in providing registration and agents services such as NorthWestern or LegalZoom (there are many others). You'll need to pay an annual fee of ~$140 in Florida. If you are using someone to do the formation, they'll charge more (usually the on-line services are cheaper than a local CPA or attorney, by $100-$300). Bookkeeping will probably be charged by the hour, but some bookkeepers charge flat fees for small accounts. Per hour would be probably in the range of $40-$80. You'll have to pay taxes - both in Florida (where the property is) and on the Federal level to the IRS. You'll be paying them as a non-Resident individual. Your CPA/EA will charge you anywhere between $150 to $500 for that (if they charge more - run away, unless there's some specific complication that requires extra costs). You will need a ITIN for that, your CPA/EA can help you get one or you can apply yourself.  Be careful with all those people selling cr@p about organizing in Delaware/Wyoming/Nevada (like CQM in his answer). Organizing in a state other than where the properties are located (or off-shore) won't save you a dime, and not only that - it will add to the costs. Because you'll have to pay to the state where you organized (CQM mentioned Wyoming - $50/year), keep registered agent in the state of organization (+$99) and also do all the things I've described above about Florida - as a ""Foreign"" (out of state) entity, which may mean higher fees. It won't save you any taxes as well, because you pay taxes to the state from which you derive income, which is Florida, either way. Remember that what you call LLC in Italy may be in fact a ""Corporation"" as defined in the US, and there's a huge difference. You should probably not put a real-estate property in a Corporation in the US. You must get a legal advice from a (Florida) lawyer ($0-$500/hr consultation), and a tax advice from a (Florida) CPA/EA ($0-$200/hr consultation). Do not consider anything I write here as a legal or tax advice, because it is not. You need a professional to help you because as an Italian, you don't know how things work exactly and relying on rumours and half-truths that you may find and get over the Internet may end up costing you significantly in damages. Also, talk to a reliable real estate agent and property manager before making any purchases." "Since as you say, an LLC is a pass-through entity, you will be making income in the U.S. when you sell to U.S. customers.  And so you will need to file the appropriate personal tax forms in the US.  As well as potentially in one or more States.  The US government does not register LLCs.  The various States do.  So you'll be dealing with Oregon, Wisconsin, Wyoming, one of those for the LLC registration.  You will also need to have a registered agent in the State.  That is a big deal since the entire point of forming an LLC is to add a liability shield.  You would lose the liability shield by not maintaining the business formalities.   Generally nations aim to tax income made in their nation, and many decline to tax income that you've already paid taxes on in another nation.  A key exception: If money is taxed by the U.S. it may also be taxed by one of the States.  Two States won't tax the same dollar. Registering an LLC in one State does not mean you'll pay state taxes there.  Generally States tax income made in their State.  It's common to have a Wyoming LLC that never pays a penny of tax in Wyoming.  Officially, an LLC doing business in a State it did not form in, must register in that State as a ""foreign LLC"" even though it's still in the USA.  The fee is usually the same as for a domestic LLC.  ""Doing business"" means something more than incidental sales, it means having a presence specifically in the State somehow.  It gets complicated quick.  If you are thinking of working in someone's app ecosystem like the Apple Store, Google Play, Steam etc. Obviously they want their developers coding, not wrestling with legalities, so some of them make a priority out of clearing and simplifying legal nuisances for you.  Find out what they do for you." While it may not be your preferred outcome, and doesn't eliminate the income, in the event you find yourself in the path described here you have a way to defer gains to the future. but I would then want to buy another house as a rental If you sell this house and buy another investment property (within strict time windows: 45 days to written contract and closed in 180 days),  you can transfer your basis and defer your gains via what is called a 1031 like-kind exchange Also, does anyone know of any books on doing this sort of thing, i.e. renting out half of your home to a tenant and living in the ret? Head down to your local library. Mine has a state guide for renters and another one for landlords. There will likely be a lot of Nolo Press books around there too.  You can also research the property tax on a lot; many counties run an arcGIS server that will tell you who owns a given property, what the assessed value is and the total tax bill, etc. LLC doesn't explain the tax structure. LLCs can file as a partnership (1065) Scorp (1120S) or nothing at all, if it's a SMLLC. (Single Member LLC). I really enjoy business, and helping people get started. If you PM me your contact information, id be more than happy to go over any issues you may have, and help you with your current issue. You need to first visit the website of whatever state you're looking to rent the property in and you're going to want to form the LLC in that particular state. Find the Department of Licensing link and inquire about forming a standard LLC to register as the owner of the property and you should easily see how much it costs. If the LLC has no income history, it would be difficult for the bank to allow this without requiring you to personally guarantee the loan. The obvious benefit of protecting yourself with the LLC is that you protect any other personal assets you have in your name. Your liability would stop at the loan.  The LLC would file its own taxes and be able to record the income against the losses (i.e. interest payments and other operating expenses.). This is can be beneficial depening on your current tax situation. I would definitely recommend the use of a tax accountant at that point.  You need to be sure you can really afford this property in the worst case scenario and think about market leasing assumption, property taxes, maintenance and management (especially if you've moved to another state.) First, determine the workload he will expect.  Will you have to quit your other work, either for time or for competition?  How much of your current business will be subsumed into his business, if any?  Make sure to understand what he wants from you.  If you make an agreement, set it in writing and set some clear expectations about what will happen to your business (e.g. it continues and is not part of your association with the client).  Because he was a client for your current business, it can blur the lines. Second, if you join him, make sure there is a business entity.  By working together for profit, you will have already formed a partnership for tax purposes.  Best to get an entity, both for the legal protection and also for the clarity of law and accounting.  LLCs are simplest for small ventures; C corps are useful if you have lots of early losses and owners that can't use them personally, or if you want to be properly formed for easy consumption by a strategic.  Most VCs and super-angels prefer everybody be a straight C.  Again, remember to define, as necessary, what you are contributing to be an owner and what you are retaining (your original business, which for simplicity may already be in an entity).  As part of this process, make sure he defines the cap table and any outstanding loans.  Auntie June and Cousin Steve might think their gifts to him were loans or equity purchases; best to clear this issue up early before there's any more money in it. Third, with regard to price, that is an intensely variable question.  It matters what the cap table looks like, how early you are, how much work he's already done, how much work remains to be done, and how much it will pay off.  Also, if you do it, expect to be diluted by other employees, angels, VCs, other investors, strategics, and so on.  Luckily, more investors usually indicates a growing pie, so the dilution may not be at all painful.  But it should still be on your horizon.  You also need to consider your faith in your prospective partner's ability to run the business and to be a trustworthy partner (so you don't get Zuckerberg'd), and to market the business and the product to customers and investors. If you don't like the prospects, then opt for cash.  If you like the business but want to hedge, ask for compensation plus equity.  There are other tricks you could use to get out early, like forced redemption, but they probably wouldn't help either because it'd sour your relationship or the first VC or knowledgeable angel to come along will want you to relinquish that sort of right. It probably comes down to a basic question of your need for cash, his willingness to let you pursue outside work (hopefully high) and your appraisal of the business' prospects. * Yes, you should incorporate if you plan on seriously investing in real estate. This not only limits liability in terms of paying back the debt but also in case your tenants sue you.  * Pass-through entities. Typically an LLC but it depends on the state if they have good or bad LLC laws. Pennsylvania is a state where you would not want to incorporate as an LLC. Other options include S-corps and LPs.  * Loans are taken out by corporations against the property. Typically mortgage loans are non-recourse. If you set up a company for each property, this further insulates you against the bank capturing other properties within the pool. However, recourse carveouts can still end up getting you on the hook personally for the loans. These typically include voluntary bankruptcy. You would very rarely have to file for bankruptcy anyway for your real estate investments. At worst, it will end in foreclosure but banks typically would prefer deed-in-lieu just because it is faster and easier for them too. You just turn over the keys and walk away. It will have very little impact on your personal finances or record. Everyone in real estate walks away from properties and leaves them with the bank. It's a fact of doing business and your lender should have been comfortable owning your property at the basis they lent money to you. If they weren't, they were just stupid.  * Yes, every real estate investment requires equity in the property. Typically it's a 20% equity check but if the lender underwrites the property to a lower value than what you purchased it for, you may have to line up more expensive financing. The company may not permit a transfer of these options. If they do permit it, you simply give him the money and he has them issue the options in your name.  As a non-public company, they may have a condition where an exiting employee has to buy the shares or let them expire.  If non-employees are allowed to own shares, you give him the money to exercise the options and he takes possession of the stock and transfers it to you.  Either way, it seems you really need a lawyer to handle this. Whenever this kind of money is in motion, get a lawyer.  By the way, the options are his. You mean he must purchase the shares, correct? The only thing the book advises to do is to start an LLC that invests in real estate, then deduct everything you do as a business expense related to investing in real estate. Going on a vacation to Hawaii?  Deduct it, you were checking out real estate.  And so on and so forth. It is a bit of work and expense to form a LLC. In the long run it is the best approach because it shields your personal assets from business liability. In the short run, you can form as a sole proprietor and operate that way, and later convert to a LLC. "You are opening up a large can of worms with how you are doing this.  In very positive years, you'll have taxes based on your income, potential Alternative Minimum Tax (AMT), etc. Each of the family members may be in a lower bracket, perhaps even needing to pay zero on capital gains.  Even if you are 100% honest, if you are subject to a lawsuit, these funds are all in your name, and you'd be in a tough situation explaining to a court that these assets aren't ""really"" yours, but belong to family.  And last, the movement of large chunks of money needs to be accounted for, and can easily run afoul of gifting rules.  As mhoran stated, a Power of Attorney (POA) avoids this. When my father-in-law passed, I took over my mother-in-law's finances, via POA. I sign in to my brokerage account, and her accounts are there. I can trade, deal with her Individual Retirement Account (IRA) Required Minimum Distributions (RMDs) each year, and issue checks to her long term care facility. It's all under her social security number - our money isn't intermingled." There are a lot of things that can be specified in the LLC agreement / charter, such as unequal distribution profits, sales restrictions, classes of ownership, etc. You should read your LLC paperwork. That said, you are generally allowed to sell ownership in an LLC in a private transaction. If you advertise the share of the LLC for sale, it's probably a violation of SEC rules. So Craig's List is a bad idea. Word of mouth or a broker is the way to go. I am not a lawyer or accountant -- you should double check this information; it might be wrong. It may clarify your thinking if you look at this as two transactions: I am an Australian so I cannot comment on US tax laws but this is how the Australian Tax Office would view the transaction. By thinking this way you can allocate the risks correctly, Partnership Tenancy Two things should be clear - you will need a good accountant and a good lawyer. I do not agree that there is a conflict of interest in the lawyer acting for both parties - his role should only be for advice and to document what the two of you agree to. If you end up in dispute, then you need two lawyers.