A Limited Liability Company or "LLC" is a business entity created by Massachusetts law by drafting and filing Articles of organization with the Massachusetts Secretary of the Commonwealth. It is also recommended that you draft an operating agreement to serve as a guide for future acquisitions, voting rights, succession plans, and disputes. In Massachusetts, an LLC can even be formed by one, single member.
Depending on your purpose for acquiring Real Estate in Massachusetts, setting up and holding the property in an LLC has many advantages, particularly for holders of investment properties.
One of the biggest advantages of holding property in an LLC, is that it limits the personal liability of each member of the LLC. This means your personal assets are usually protected in the event a lawsuit arises due to an incident that occurred at the LLC property.
Another important asset protection benefit to an LLC is the statutorily-limited remedy of a creditor to a so-called charging order. Generally, this means that unlike an interest in another type of entity, the interest cannot be taken to satisfy a judgment creditor. However, this benefit does not exist in the case of a single member LLC.
LLCs are also useful to minimize taxes. For example, the state imposes a stamp/excise tax on the sale of real estate based on the sale price of the property that is payable by the seller. Massachusetts has not taken the position that a single member LLC is a property interest, at least for purposes of imposing the stamp tax. In theory, this would allow a taxpayer to transfer their property to an LLC and then sell the membership interest to avoid paying the excise tax.
These are just some of the many benefits to holding title to real estate in an LLC. If you have any questions about forming an LLC or transferring property into an LLC, our attorneys at Lane, Lane & Kelly, LLP can help determine if it is the right fit for you.
Call 781-848-0040 or fill out our contact us form to schedule a free consult.
This blog is made available for educational purposes only as well as to give you general information and a general understanding of the law, not to provide specific legal advice. By reading this blog you understand that there is no attorney client relationship between you and Lane, Lane & Kelly, LLP.