Why You Should Put Your Land in an LLC

A Limited Liability Company (LLC) is a formal business structure established under state law that landowners can use to hold real estate. This approach separates the land as a distinct legal entity from the individual owner, providing a structured way to own and manage property.

Achieving Liability Protection and Asset Separation

The primary reason for placing land into an LLC is to create a legal barrier between the property and the owner’s personal finances. Because the LLC legally owns the land, if a lawsuit arises from an incident on the property, financial exposure is contained. For instance, if a visitor is injured or a tree damages a neighbor’s property, any legal judgment is limited to the assets held within the LLC.

An owner’s personal assets, like their home and bank accounts, are shielded from claims against the business. This protection is reciprocal, safeguarding the land from being seized by an owner’s personal creditors. If an owner faces personal financial difficulties, creditors cannot make a claim against the land held by the LLC.

To keep this liability shield effective, you must maintain the LLC’s separate identity. This involves keeping separate financial records, using a distinct bank account for the LLC, and following state-required formalities. Failing to maintain these distinctions could allow a court to “pierce the corporate veil,” exposing the owner’s personal assets to business liabilities.

Facilitating Ownership Transfer and Estate Planning

Holding land within an LLC simplifies transferring ownership. Instead of executing and recording a new property deed for each change, the transfer is done by assigning LLC membership interests. This method is efficient for adding new partners or investors. The operating agreement can outline the specific procedures for these transfers.

This structure is also beneficial for estate planning. An LLC’s operating agreement can specify what happens upon a member’s death, allowing for a smooth transition of ownership to heirs. This can bypass the lengthy and public probate court process. Heirs inherit membership interests in the company rather than the physical property, which streamlines asset distribution.

An LLC can offer more privacy than individual ownership. At the state level, the names of LLC members may not be required on public records. While the federal Corporate Transparency Act increased reporting requirements, a 2025 policy change exempted most U.S.-based LLCs from reporting owner information to the Financial Crimes Enforcement Network (FinCEN). Additionally, the transfer of membership interests is a private transaction, unlike a publicly recorded deed.

Required Documentation for Placing Land in an LLC

Before transferring land to an LLC, the entity must be legally formed. This requires filing Articles of Organization with the appropriate state agency, usually the Secretary of State. This document establishes the LLC and includes its name, principal business address, and the name and address of its registered agent.

An Operating Agreement should also be drafted. This internal document governs the LLC’s operational and financial decisions. It details components such as member contributions, the allocation of profits and losses, and the management structure. While not always filed with the state, a comprehensive operating agreement helps prevent future disputes among members.

Preparing for the transfer requires drafting a new deed to convey the property to the LLC. To do this, you will need the precise legal description of the property from the existing deed. The new deed must identify the LLC by its exact legal name as the new owner, or grantee.

Executing the Transfer of Land to the LLC

After the LLC is formed and documents are prepared, the land transfer can be executed. The current property owner (the grantor) must sign the new deed in the presence of a notary public. The notary verifies the grantor’s identity and witnesses the signature.

The signed and notarized deed must be filed with the county recorder or land records office where the property is located. Recording the deed makes the transfer official and part of the public record. A filing fee is required for this service.

After recording the deed, complete a few administrative steps. Notify the property insurance provider of the ownership change to update the policy, listing the LLC as the insured party. If the property has a mortgage, inform the lender and review the mortgage for a “due-on-sale” clause. This clause could require the loan to be paid in full upon transfer, though lenders may consent to the transfer.