3 Benefits of Buying an NYC Home as an LLC

This is an update of a previous article Written by Teresa Alessandro for Elegran Real Estate June 10, 2019

LLCs, or hybrid companies that can protect owners from legal issues and help with tax abatements, are a popular strategy that many homeowners take when buying in NYC. LLC buyers can easily go through the purchasing process with condos in particular. Steven Wagner, co-op and condo attorney at Wagner Berkow LLP, stated that “unlike a co-op, a condo can't say yes or no to your purchase, all they can do is exercise the board's right of first refusal, which very few buildings do.” A condo's right of first refusal essentially tells the purchaser that the condo has no need to directly purchase the unit being transferred, and therefore you as a buyer can proceed with your transaction and become an owner in the building.

According to Ross Levine of Schwartz Levine PLLC, “There are tax implications associated with any choice and typically if the parents are buying for their adult children, we usually recommend creating an LLC in NYS which is owned by a newly formed Trust. This would protect the asset in the time of an Estate proceeding and will avoid any issues with a buyer being a foreign person.” Creating a corporation or specifically an LLC to then purchase an apartment in NYC allows for 3 main benefits:

1. Ownership Structure Makes You Less Liable

One benefit is that the LLC can deflect any risk of liability from being sued personally. The LLC corporate shield protects owners so that if the property in question were owned by an LLC, the owner’s risk exposure would be insulated by the protection of the company, leaving only the assets owned by the LLC (as opposed to all of the owner’s personal assets) exposed to potential lawsuits. In other words, personal finances would not be in jeopardy.

There are legal protections to holding a property as an isolated company rather than in your name or your company’s name, in the event that in the future you opt to rent out the unit. In addition to your homeowners insurance policy, having the property owned in an LLC can protect you as a landlord if your tenant should ever sue you.

2. Transfer of Property

The way an LLC is structured allows the person managing it to easily transfer their ownership. Those who own a real estate company are able to “gift” it to heirs without having to sign a deed. The process of gifting can even be preferable, as gives owners the ability to avoid certain taxes.

3. Single Taxation

The LLC can basically become what’s called a pass-through entity for profits, avoiding the possibility of proceeds being taxed once as company income and again as individual income of the partners. Speaking with your New York or U.S. Accountant and Financial Advisor is always recommended.