Help me decide on GA or NC for LLC for Siblings inheriting NC Beach Condo

Parent Cafe
1

Hello to any parents left here after the format changes. My siblings and I are inheriting my mom’s NC beach condo. One sibling lives in NC, I live in GA, and third sibling is in LA. Our mom passed away in 2018, and we are not yet finished with the court system due to other extended family estates that are trying to close and flow funds through our mom’s estate and on to us.

I am trying to understand LLC differences in NC/GA (not considering LA as my sibling there has a higher likelihood of moving). I understand there has to be a resident and physical street address in the state we choose to file our LLC. (to keep from having to file additional paperwork). So we are looking at NC or GA.

Filing fees and annual report fees are slightly lower in GA, but I now need to understand tax implications in each state. Condo is paid for, and has an estimated value of $189,000. We will earn income through rental fees, and have expenses for maintenance, utilities, HOA fees, etc. The condo has not made money each year, and we would be thrilled to even break even. But want to understand tax laws that might tax the value of the condo, and whatever else I don’t know that I don’t know will affect how much $$ a state will try to take from us even if we don’t break even.

I am also confused about the title and if we can file for the LLC without an actual title? We are a ways away from getting actual condo title, but we do have court’s permission to accept rental fees and responsibility for all bills. We do not have an EIN number yet, and so the rental realty company is holding onto our funds until we can set up our banking account.

Can anyone speak to next step? If I can decide on NC or GA, that would be huge. And I want to get a business banking account set up, but not sure how far along I have to be to request the EIN.

I have in my hands the book recommended to me here, Saving the Family Cottage, put out by NOLO. I am certain we want LLC, and siblings have agreed with me.

Feel free to PM me if you would rather “talk” in private. I had someone PM me previously (a good while ago) offering to help me, and now I can not locate that message in my inbox.

If you have managed to read this far, I award you 100 points for hanging in there! I hope you can make sense of my ramblings.

2

About 12 years ago my brothers and I inherited a beach condo in SC and created LLC for it. The advice we got from the estate lawyer was to establish the LLC in the state where the property is located and that’s what we did. Our lawyer referred us to a SC lawyer to set it up – it was not expensive.

Hope this helps.

3

It seems like the prudent thing to do would be to consult an attorney.

4

It really doesn’t matter much which state you use to create your LLC from the standpoint of legal rules. For your purposes, the various statutes are going to be almost identical.

If you create a Georgia LLC, however, you will have to qualify the LLC to do business in North Carolina anyway, because it will be owning property and earning income there. And you will have to file annual tax returns, both federal and North Carolina (and not in Georgia or California). If it’s a Georgia LLC, it will have to make periodic filings in Georgia along with its regular filings in North Carolina. If it’s a North Carolina LLC, it will only have to be making filings in one state. So I vote for North Carolina on that basis. You probably avoid a small annual fee in Georgia that way, too, but you will likely wind up incurring an extra fee in NC (see below).

I also vote for using a service company as the registered address in-state, rather than the condo. You don’t want official mail showing up at the condo when no one is there, or when it is being rented out. Having a service company act as the registered agent will cost about $100 per year, but that’s a good idea.

5

Consult an attorney. Ask, among many other questions, if a “family” LLC is the wisest route for ownership of a single asset, such as a rental condo, based on the facts and circumstances of your situation.

Also, especially if a rental unit, then liability / property insurance should be an immediate prioity.

6

Have a local lawyer check to see if there are any liens on the property. In a state where my siblings and I inherited a condo, we did not know that the state and municipality file a lien immediately (regardless of the circumstances) when someone dies to make sure that all property and estate taxes (if the state has an estate tax) are paid BEFORE there can be any change of title or ownership. We did not know this. It was a very expensive mistake to make, mainly due to us having retained a lawyer in the state where the decedent was living, not the state where the property was located. It got fixed in the end, but it was expensive and a hassle to undo what had been done in order to satisfy the state and town in order to retitle the property.

We also had some aggravation with the property insurer, but that didn’t cost money, just time to resolve.

7

“In a state where my siblings and I inherited a condo, we did not know that the state and municipality file a lien immediately (regardless of the circumstances) when someone dies”

Not sure if that applies to every state. CA, for example, we do not have this rule, unless the estate did not pay the tax.

Anyhow, my advice is to sell the condo and share the funds, why holding onto a not profitable problematic real estate? Maintenance costs(that included agent commission for renting and management fees and repair bills) will be through the roof if the owners are long distance. And if you and your siblings own that property together, it will potentially create some friction between you.

Regarding LLC, you should consult an attorney. But unless you are trying to avoid future liabilities using the LLC. It is perfectly ok to hold it under the name of the estate. In CA, LLC costs $800/year additional, just for the state filing, plus the accounting and tax filing costs, have no idea how much it cost over there.

8

And Before you form an LLC, check out the property insurance premium, I am sure they might be different.

9

@artloversplus

IIRC, the OP and family also plan to use this inherited property. It’s not an investment to make money.

10

“the OP and family also plan to use this inherited property. It’s not an investment to make money.”

@thumper1
I went through OP’s posting again, did not see private use reference. Maybe I am missing something. Nevertheless, if you and your family members need to use this privately throughout the year, that makes it more complicated. That means you are renting it out on a short term basis such as using Airbnb. I would not do that unless you are in less than 20 min. driving distance to the unit. I have seen too many problems when renting a condo on a short term basis. I would also check the condo’s CCR to make sure you are allowed to do that.

I’d say if you have so much interest in that beach, rent someone else’s unit when you need it. Because once you don’t own something on that beach, you are free to go anywhere else.

11

BTW
Regarding the current income for the estate, you should set up an estate EIN from IRS and then you can open an account to receive income. Once the estate is settled, if you decide to have an LLC, you can then create that LLC and move assets into it. Right now, before settlement, you are wasting your time to create that LLC. That is what I did in CA, not sure in NC, consult your attorney.

12

There are rental management companies in vacation areas that deal with weekly condo rentals. I happen to be staying in one right now. It’s not a hassle for the owners who do use this place many weeks of the year.

Yes, there is a cost associated with this service, but you don’t have to use Airbnb or the like.

13

@artloversplus

Read this thread. Selling is not an option. The family is using a rental company.

http://talk.collegeconfidential.com/parent-cafe/2093243-more-specific-target-market-oceanfrontcondo-side-unit-w-ocean-view-only-from-balcony.html#latest

On a different thread, the OP states that the place will be rented in the summers to generate the income to support it…and the family will have to use it in the off season. This is common for these types of properties.

It’s a beach community. Weekly rentals are the norm.

14

OP You can get an Estate EIN here:

https://tax-id-online.com/get-started?msclkid=c4f7ebaf45f31b617a86b62cfe0e16bc

Once you have an EIN, which takes 10 min, you can take that email from IRS and open a bank account. You can use that EIN forever until the estate is TOTALLY liquidated and distributed. At that time, you file a FINAL income tax return for that EIN.

The forming of an LLC has nothing to do with the estate because it is on the receiving end.

You must consult an attorney about local laws. Because in CA, a transfer of real estate will have the implication of real estate property tax basis. I spent thousands on legal fees for my mom’s estate.

15

@powercropper

As noted by many…consult a lawyer in your area which luckily is not CA.

Part of our family owns a vacation home that was set up as an irrevocable trust…I would not suggest that route. However, the trust was set up in the state in which the property is situated. Most of the trustees do not reside in that state.

One would think that for tax purposes for your LLC, the state in which the property is located would be the easiest…but a lawyer in that state can advise you well. So…NC.

You could discuss this with a lawyer in GA or LA just to see.

What happens tax wise with inherited property varies from state to state.