When you run a business, one of the things you may want to plan for is the succession of that business and transfer of your business assets. If you don’t sell your properties or assets during your lifetime, then you will need to account for them in your estate and succession plans.
Passing on commercial property is done similarly to passing on residential real estate. You have the option of assigning a beneficiary to take over the property, or you could opt for other transfer methods, such as adding a co-owner to the deed. What many business owners like to do is to use a limited liability company as a legal structure to pass on assets without having to worry about gift or estate taxes.
Why use an LLC instead of passing real estate on directly?
One of the nice things about an LLC is that it is a separate entity. This means that you are able to separate business assets from your personal assets and may minimize the amount of gift or estate taxes you or your loved ones pay.
With a family LLC, your beneficiaries and heirs become shareholders in the assets that you have assigned to the LLC. During your lifetime, you keep control of those assets, but your heirs may use those assets. With a family LLC, heirs are restricted, though. They are unable to sell their LLC shares, transfer their membership in the family LLC or withdraw from the company. This helps protect the assets that are invested, like your commercial real estate.
When you pass away, those assets transfer to the intended beneficiaries. In the case of a commercial property, the title to the land and structures can be transferred through an LLC.
While an LLC might be more costly to maintain than other methods of transferring property, it could be a good way to keep your business assets safe and to be sure they’ll transfer in accordance to your succession plan. This is just one option that is available for transferring real estate, so be sure to look into all of the options before you choose how to proceed.