Tax Consequences for Transferring Property to a Limited Liability Company

••• Jupiterimages/ Images

Related Articles

If your small business is organized as a limited liability company, you can transfer your personal property to your company. You must be prepared for tax consequences. Familiarize yourself with the possible tax consequences of the transfer for yourself and any other LLC members. Though an LLC is a pass-through entity, and therefore does not pay taxes itself, it can pass on higher taxes to LLC members as a result of the property transfer.

How to Transfer Property to a LLC

You must put your property in the company name to transfer it to a LLC. Create a document showing you donated the property to the company. Record a deed transfer with your county clerk showing the company now owns the property.

Taxes When Selling the Property

If the LLC sells the property at a later date, the gains on the sale will be taxed. Because the LLC doesn't pay taxes, this means LLC members will pay the tax. Ensure that all members of the LLC understand this tax obligation before you transfer property to the company.

Tax Reassessment

If you transfer a house to your LLC, the transfer could trigger a reassessment. A higher value might be placed on the house during the reassessment, resulting in higher property taxes. Ask your county clerk if your county must reassess transferred property.

Income Taxes

If your LLC uses the transferred property to produce income, you will end up paying tax on that income. The LLC will pass the tax liability on to you and the other LLC members, and you will pay individual income taxes on it.


Your LLC can depreciate any assets it owns, and this includes property you transfer to it. This depreciation will reduce the tax bill on any income from the property. The IRS will allow the LLC to depreciate the property over the lifetime of the asset.