Where do I put my home?

Question: Can I put my personal residence into my corporation or LLC?

Answer: Sure, there isn’t anything that says you can’t put your personal residence into a corporation or LLC.

But, there are a few things you should know before you do that. The first thing is we wouldn’t ever recommend you putting your personal residence into a corporation or LLC since we believe putting your personal house into your corporation or LLC is a very bad idea.

One of the main goals of setting up a corporation or LLC for your business is to separate your personal assets from the assets and liabilities of the business. When you put your personal residence your combining your personal and business assets which means if the business losses a lawsuit, then they could take your personal residence to settle the judgment. The possibility of your business being sued is great, so the possibility of losing your home is great. Not our idea of protection.

Another potential problem with putting your personal house into your business entity is that you can create some very real tax problems for your business. The entity would be required to pay taxes on the sale of the home; you get the luxury of paying long-term or short-term capital gains taxes on the sale of the home; then as the equity in the home increases, it must be claimed as profit on the tax return of the entity and the entity must pay taxes on the profit. Doesn’t sound like protection, it sounds like a great way to pay taxes, more taxes and even more taxes; but hay if you like paying taxes go for it.

Lastly, if there are mortgages on the property, since the incorporated entity is not you, the mortgage company or companies can ask you to pay the loan they gave to you in full immediately.You do have options for protecting your personal residence as well as any business properties or investments properties. You can contact NexStep Innovations LLC and we can discuss options to protect your home or investment properties.