Transferring Property Titles from an Individual to a Florida LLC
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Objective:
- To transfer a personally held property title to a Florida LLC.
Entities:
- Florida Property Owners
- Florida Limited Liability Companies
Additional Information:
Florida rental property owners and other landlords are often interested to learn about the benefits that come with creating an LLC to own those properties on their behalf. Florida rental property LLCs don’t just help limit your personal liability if you get sued – they’re also useful for avoiding double taxation and other possible advantages that you can read about here.
Are you thinking about moving your property into a Florida LLC?
This transfer can trigger a tax reassessment, which can lead to increased property taxes. It also applies to transferring property out of a Florida property LLC and when making significant changes to the company’s ownership.
Pro Tip: Think twice about this kind of transfer if your property has gained in value over the years. It’s always smart to talk to a Florida business lawyer before making major decisions or transactions.
1. Meet with Your Mortgage Lender
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If the Florida property is still under mortgage, you have an obligation to inform the lender before anything can be transferred over to the LLC. The mortgage won’t be transferred when signing over the real estate title to the Florida LLC, which means you’re still responsible for making payments. Depending on your arrangement, you might even need to pay off the mortgage in full before changing ownership. While you’ll need to discuss the specifics with your lender, don’t be surprised if they ask you to refinance the mortgage or sign a personal guarantee, too.
2. Form a Florida LLC
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Next, you’ll need to form a Florida LLC if you haven’t already. This can be done by following our guide here before drafting and filing your Articles of Organization with Florida’s Division of Corporations. Once the state has had time to process and officiate the formation, you’ll need to obtain a Tax ID Number for your Florida LLC. Then, you’re ready to open up a bank account for your business, which is essential to separating business assets from personal assets and protecting you from liability.
Alternatively, you can always hire a local business law firm such as our own to do all that work for you. Located in St. Pete, our attorney has helped entrepreneurs form businesses from all across Florida. Don’t hesitate to let us put that experience to good use for your Florida property LLC.
3. Obtain a Form for a Deed
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Florida, like most other states, has its own certain criteria for what information must be recorded in a deed, so make sure to use a form tailored for the state of Florida. Rental property owners can choose between two different types of deeds: warranty and quitclaim deeds. Warranty deeds guarantee that there are no third parties with claims to the property and that you are its true owner. Quitclaim deeds, on the other hand, don’t offer that same promise, and only record that you are passing any personal interest held in the property to your Florida LLC.
There is some debate as to which deed is best for transferring personally held real estate or other property to a Florida LLC. Warranty deeds arguably offer greater protection, while other property owners prefer quitclaim deeds in the name of expediency.
4. Fill Out Warranty or Quitclaim Deed Form
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Once you’ve decided on which type of deed form to proceed with, you’ll need to actually fill the document out, which can be confusing if you’ve never done it before. For the purposes of the transfer, you are acting as the “grantor” while the LLC is the “grantee,” so be sure to fill those fields out appropriately. Use your full name as it was recorded on the present deed, and don’t forget the Florida property LLC’s suffix when signing on behalf of the company, either.
If you aren’t comfortable preparing the deed form yourself, then a Florida attorney can complete the form for you. For assistance with deciding between warranty or quitclaim deeds, or for help filling them out once you’ve reached your decision, contact our St. Pete office today.
5. Sign the Deed to Transfer Property to the Florida LLC
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Don’t sign the deed until you’ve double-checked that all the information therein is correct. You’ll be signing on behalf of yourself individually and on behalf of your Florida property LLC unless there is another Member who will act as the authorizing signatory for you. Make sure that you have a notary on hand to notarize the document – this confirms that all the signatures on the document are valid, which will be useful if you ever find yourself in litigation.
6. Pay Documentary Stamp Tax
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Anyone who transfers a deed in Florida must pay the state’s documentary stamp tax. This tax is paid to the Clerk of Court if the document is recorded. If the document isn’t recorded, however, it is paid directly to the Florida Department of Revenue instead. The cost of this tax depends on the total consideration paid (or to be paid) for the transfer. Generally, when a mortgage is involved, the consideration will also include the balance of the mortgage owed. Otherwise, it will be whatever consideration was provided in the deed.
The rate that your Florida property LLC can expect to pay for your documentary stamp tax will be $0.70 per $100 (or portion thereof) of the consideration, unless the property is in Miami-Dade County. Documentary Stamp tax in Miami is instead calculated at a rate of $0.60 per $100 (or portion thereof) for single-family residences. Other types of property in Miami-Dade are taxed at a rate of $0.60 plus an additional $0.45 surtax per $100 (or portion thereof).
7. Submit the Deed for Public Record
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Next, it’s time to create a public record of the property transfer. You can accomplish this by submitting a copy of the deed to the county office in the jurisdiction in which the property is located. For example, if you were transferring a property near our offices in Downtown St. Petersburg, then you’d need to send your submission to Pinellas County officials. This officially transfers ownership of the deeded property from yourself to your Florida property LLC.
8. Update the Lease
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Once you’ve transferred your rental property into your Florida LLC’s name, it’s extremely important that you remember to update any leases in accordance with the change. This is essential to preserving the liability protections granted through LLC ownership, as is keeping your business bank account separate from your personal finances. Rent must be paid to the LLC now, rather than you individually, and that money must go straight into the business’s account – not your own. Doing otherwise might cost your coverage.
For help forming or managing your Florida rental property LLC, contact our Florida business attorney’s St. Petersburg offices by calling (727) 279-5037 or by scheduling a consultation online.
