Different states have distinct rules regarding the ownership of a property through a legal entity, such as transferring the title of real property to a limited liability company (LLC).
Although Florida offers several tax advantages, the member of an LLC established within state jurisdiction might be interested in investing in properties located out of state. Is it possible to own property in another state through a Florida LLC? Keep reading to find out.
Can a Florida LLC Own Property in Another State? – The Verdict
In a limited liability company (LLC), the company is a separated legal person from its owners (referred to as “members”). The legal entity itself has the same right to acquire property in another state as one of its individual members.
Depending on how the company is structured, the individual members of a Florida LLC may all be in different states while the company is active and operating.
Owning property in a state other than Florida may constitute “doing business” in the state where the property is located. When a “foreign” company conducts business activities out of the state it was originally formed, it must register as a foreign company in that state.
Hence, to own property in another state, a Florida LLC must register as a foreign LLC in that specific state.
Each US state has local rules regarding the treatment of legal entities formed out of state. In most cases, a Florida LLC may be registered as a foreign company to enjoy fiscal benefits such as discounts for taxes or annual exclusion gifts.
Why Should One Transfer the Ownership of a Property to a Florida LLC?
As its name suggests, a Florida LLC has limited liability protection. If the members in an LLC are personally sued for damages, the assets held by the LLC are not exposed to judgments or liens.
Conversely, the members of a Florida LLC are not personally liable for the business’s debts and liabilities. If a creditor decides to file in court to collect assets to fulfill the company’s unpaid debts, the members’ personal assets are protected by law.
Florida LLCs also offer tax flexibility, as they are “pass-through” entities. All the income generated by an LLC passes through the company directly to its owners, being taxed only at their personal tax rate.
Unlike corporations, there is no double taxation in a Florida LLC, as members only have to report their share of the received income in their personal tax returns.
Can a Florida LLC Own Property in Another State? – Attention to Detail
The guidance of an experienced attorney is crucial for anyone interested in owning out-of-state property through a Florida LLC. The process of registration varies according to each state’s laws, which include the expenses and fees involved.
Depending on the situation, the property will need repairs and maintenance, which implies the drafting of new contracts with contractors and other professionals located in another state.
If the out-of-state property is not properly “deeded” to the LLC, the individual member who has acquired the property will retain its nominal ownership – which means no limited liability protection.