An LLC (limited liability company) is a business structure that is typically used to help keep your personal finances and assets separate from your business. It means that if your business falls into debt or is sued, your personal finances and assets will be protected — and vice versa. If you have an LLC, then you might be wondering if you can use it to buy a home. The answer is yes; however, whether you should or not is a different matter.
The Benefits of Using an LLC to Buy a Home
- Improve LLC’s financial status – If you’re trying to grow your business, using your LLC to purchase a house will put the asset under its name, thereby growing its financial profile (and potentially making it easier to secure business loans and credit).
- Ensure your privacy – The purchase of property is typically public record; however, if you use an LLC, you can keep your name out of that public record.
- Limited liability – If someone is injured on your property, they’ll often only be able to sue your LLC and not you personally.
The Drawbacks of Using an LLC to Buy a Home
- Securing financing is more difficult – Trying to secure certain types of loans to buy the home can be difficult if you’re trying to do so under an LLC.
- You may not qualify for capital gains exclusions – If you sell your house and make a profit, you’ll have to pay capital gains taxes. If you’ve bought the house using an LLC, you won’t be able to qualify for the capital gains exclusion, which means you’ll have to pay significantly more in taxes.
Keep these pros and cons in mind if you’re thinking about using an LLC to buy a home. For more home buying advice, contact us at Randy Lindsay today.
