Moab, UT asked in Business Formation for Utah

Q: Is it ever a good idea to create an LLC if multiple family members want to purchase property and build on it (we don't

necessarily want to form a business)?

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1 Lawyer Answer
Wesley Winsor
Wesley Winsor
  • Saint George, UT
  • Licensed in Utah

A: An LLC is good for liability protection. If you feel like it is too much risk when there are several owners and their guests on your property, then it would be a good idea to create an LLC. This would limit your exposure to the assets of the business.

A second reason you might want to consider and LLC would be to make the transfer of ownership easier. In an LLC each owner owns membership units. If they want to pass their ownership on to their children or others then it is a simple process of an assignment, but if every person were on the title to it then another deed would have to recorded.

In addition, if you wanted to limit which owner would be able to encumber the property, an LLC would be helpful so that only the designated "manager" and not everyone who had an ownership interest in the property could say borrow against the property which would be the case if all persons were owners of the property rather than just members of the property.

Last of all, you could make a property management agreement that everyone could sign, and it would be binding, which would act in the same way an operating agreement of an LLC would. This would work either way, but it is easier to enforce and operating agreement against say selling your ownership to someone not approved by the rest of the owners in an operating agreement as opposed to a property management agreement.

There are a lot of good reasons to put it in an LLC rather than owning the property individually as co-tenants.

I hope this helps.

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