Video instructions and help with filling out and completing How Form 2220 Assets

Instructions and Help about How Form 2220 Assets

Hi Clint Kunz here with Anderson business advisors and in this segment I want to discuss buying property in a limited liability company and the various ways you can do it based upon how you're going to pay for the property now when you're buying long term there's typically four ways we're going to buy property that is either you're gonna buy for cash you're gonna use traditional financing with a lender you're gonna get a standard loan you may use private money or you could be using institutional financing let's assume that you're buying a pool of properties now depending on the type of financing that you're going to use to acquire these properties or the cash that's being used for them that is gonna change how we recommend you structure that deal now this is very important when you're buying real estate with a limited liability company because you don't want to end up at you know two days away from closing and all of a sudden the underwriter tells you hey we can't close the way you're looking to do it because the LLC is wrong or we can't even take title in the name of the LLC so what you want to do is make sure you're setting it up right at the outset so you can close on time and point of fact what I tell people all the time is check the title check with the escrow right when you start the sale enter into that agreement or purchase and sale agreement to find out what they're gonna need at closing to find out if you can even close in a limited liability company all right with that being said let me just show you how you should structure these deals based upon the financing you're using so let's say I'm buying for cash oh this is cash if I'm gonna buy this house for cash and I want to create a limited liability company I will do that typically in the state where the property is located so I'll set up my LLC ideally you want to get a bank account opened ahead of time but this isn't necessary you can always if you know if you don't get the bank account set up in the LLC ahead of time and you have the cash in your own name you can pay the cash to the seller over here and then just have escrow or title put title into the name of the LLC at closing that's one way to do it or you can contribute the cash to the LLC and then have the LLC pay the seller and then the property will flow into the LLC at closing so cash is probably the simplest most straightforward process when it comes to closing but here's something you may not know that you will need you will need at closing to get a certificate assert of good standing all right you're always going to need a certificate of good standing when you're closing in a business entity you obtain this from the secretary of state where the entity is filed then the reason I'm bringing this to your attention is that depending on the state this can sometimes take up to a week to acquire you don't want to be in a situation like I said we're two days before closing you're told for my title you need this certificate or they will not allow you to close in your LLC and now you have to push your closing back you know week or 10 days so make sure you line this up ahead of times now these certs they're only good for 30 days so you can't get it seven months in advance because that will not work either it's considered to be stale at that point in time all right so that's cash let's assume we're dealing with traditional financing I'm gonna be working with a Wells Fargo and I have a limited liability company here here's the seller over here here's the property and Here I am down here now this is traditional financing all right so what are you doing traditional financing in that case you're gonna buy in your own name unless you're dealing with a lender that is a community bank and they intend to treat it as a portfolio loan it's just not gonna happen because Fannie Mae Freddie Mac's in a require if it's residents or real estate that the bank write a residential mortgage and that doesn't allow you to close in a limited liability company because that would be a commercial loan so what you're gonna have to do is close in your own name pay the seller so you'll put your down payment will go to the seller the bank will finance the difference and then you'll take the property you'll take title back in your own name now your LLC is sitting up over here on the side just waiting for you now to move your property from your name into the LLC for asset protection so after you've closed title is now in your name that is when you can deed the property into the LLC now if you're not using us just make sure whoever you use to deed this property into that limited liability company use is a warranty deed do not use a quitclaim deed or you're gonna void your title insurance policy okay hear that again do not use a quit claim deed or you will void your title insurance policy so that's buying with traditional financing just like this now what will change if I'm using a private money lender private money okay or a community bank community lender okay these are pretty much there girl both gonna be the same here so again we're back to our structure here's their seller here's the property here's my limited liability company here's me down here