Property from an LLC
New to getting into commercial property, so bear with me.  Looking at purchasing a multi unit property from an LLC that only holds the one property and was wondering if was possibly and/or made more sense to look at "purchasing" the LLC and assuming ownership of the property (while leaving it under control of that LLC), of if I should form my own LLC to then purchase the property.
[{"id": "ddqsf4a", "text": "Are you buying in cash?", "replies": [{"id": "ddqtpkd", "text": "No, would be financing.\n\nAND that question (along with my answer) I believe effectively answered it for me, thank you.  Bank is not likely going to lend me the money need for an LLC, as they would lend for real estate.  Assume that's where you were going with that?", "replies": [{"id": "ddqtzuz", "text": "not to mention whoever holds the seller's paper probably isn't down with them selling the ownership out from under them...", "replies": [{"id": "ddquo5e", "text": "Excellent point.  Although I believe that the current owner owns it clear.  She's getting up in age, hence the reason for her selling, otherwise I might consider approaching her about seller financing.", "replies": [{"id": "dds5jqy", "text": "if there is an assumption clause in the existing Note, you can assume the debt through a transfer of interest, but you would probably be fucked on the gap from purchase price to assumed loan. I don't know many lenders looking at B-notes on a small MF acquisition, especially if there is hair on it. ", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ddqutn8", "text": "You got on the right track. Not only banks, but private lenders as well will mandate a separate LLC for (each) property that you own, which can then be tied back to a central entity which is your \"company\". A real estate lawyer will probably be able to tell you other reasons beyond financing for why this is done as well.", "replies": [], "depth": 3}, {"id": "ddquzqb", "text": "Correct.  I figured that might shortcut this whole process of deciding :)\n\nThere actually are ways to do it, but you'd be getting quite complicated.  It'd be unlikely to be worth it.", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ddqwc67", "text": "I would start my own LLC and purchase the property. I wouldn't consider an assignment of the membership interest, are you doing this as a short cut?", "replies": [{"id": "ddr46h0", "text": "The thought wasn't as much for a short cut, but to possibly prevent the increase of the property taxes.  As they are locked to the current owner/prior sale, the thought was that by avoiding the direct sale of the property thru the sale of the LLC, I could avoid the property tax hike.  \nAnd NO, I would not, and will not, proceed without proper legal advice.  I was just trying to get some insight here before I met with my attorney.", "replies": [{"id": "ddr5sai", "text": "&gt; The thought wasn't as much for a short cut, but to possibly prevent the increase of the property taxes. As they are locked to the current owner/prior sale, the thought was that by avoiding the direct sale of the property thru the sale of the LLC, I could avoid the property tax hike.\n\nWhere I am from you can't legally do this without paying the transfer taxes and consideration on the sale. So, ignoring the concerns from owning an LLC you know little about, you don't really benefit the way you want. \n\n&gt; And NO, I would not, and will not, proceed without proper legal advice. I was just trying to get some insight here before I met with my attorney.\n\nDiscuss this idea with your attorney. It may be different in your jurisdiction. ", "replies": [{"id": "ddr65b0", "text": "In some states, the property taxes are reassessed on sale. If the current owner has held for a long time, the increase can be substantial. I don't think the assessor is going to be triggered for a reval on this type of transfer. I'm curious to know the answer.", "replies": [{"id": "ddrdyry", "text": "I have done some research on the transfer tax issue. A minority of states tax transfers of a \"controlling interest\" in the entity that holds the property (somewhere around 12 states). No idea about the property tax issue.", "replies": [], "depth": 5}], "depth": 4}], "depth": 3}, {"id": "ddzg69l", "text": "I don't know your local tax laws, but usually purchasing above a certain ownership percentage of an LLC triggers the same transfer tax / reassessment as an outright sale does. Those who wrote the law usually have foreseen this obvious workaround and written the law accordingly to address it.\n\nCheck with your local real estate attorney. There may be legit reasons to acquire an llc rather than purchase from it, but avoiding tax consequences is rarely one of them.\n\n", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ddr01lc", "text": "there are large tax implications to this as well as what the others said.  ", "replies": [{"id": "dds5n8i", "text": "what sort of tax implications? Wouldn't it be more for the people selling their interests? The only thing I can think of is the treatment of the 'goodwill' (for lack of better term) of the new equity coming from the purchase price derived from the property. ", "replies": [{"id": "dds5zbt", "text": "it's generally a plus to those selling.  actually this is the only reason I've seen anyone do this.  when you buy property the basis is reset and you can begin to depreciate it.  when you buy an llc this does not happen, you inherit the past basis it was purchased at and the accumulated depreciation.  it is possible to sell this tax liability through an llc sale, not through a property sale.  it's more complicated than that , but this is the kinds of issues you will have with an llc sale ", "replies": [], "depth": 3}], "depth": 2}], "depth": 1}, {"id": "ddr5q0f", "text": "LLC laws vary by state. An LLC is not something nationally recognized. Your decision would hinge on HOW that LLC is recognized by the IRS (as an S corp, C corp, or disregarded entity), then it would hinge on the laws of that state. \n\nConsult an attorney and a tax attorney. \n\n", "replies": [], "depth": 1}, {"id": "ddra32d", "text": "Tax jurisdictions have change of control provisions for reassessment for exactly this reason. It likely won't work and you don't want to buy the LLC because you will inherit any potential liabilities along with the asset. Just buy the property and do it right. If it doesn't work with a tax reassessment then it's not a good investment to begin with. ", "replies": [{"id": "ddzg7b2", "text": "Bingo.", "replies": [], "depth": 2}], "depth": 1}, {"id": "ddvyxp8", "text": "Another reason not to do it is that you could potentially take on responsibility from any past transgressions committed by the llc. Overall, it's a bad idea. ", "replies": [], "depth": 1}]