Quick Answer
An LLC can purchase and hold investment real estate, but it must be correctly formed under state law, accurately identified in all transaction documents, properly authorized to enter into the transaction, and acceptable to any lender involved in the transaction.
Many investors use LLCs to hold investment real estate. The liability protection and organizational structure make LLCs a popular choice. But when it comes to title, an LLC's ownership structure creates specific requirements that must be satisfied before closing.
A Person Must Have Authority to Act for It
An LLC is a legal entity, but it cannot sign documents on its own. A person with proper authority must act on behalf of the LLC. The title company typically needs to verify who has that authority and that the person is acting within the scope of their authority under the LLC's operating agreement.
Title May Need
- Formation documents: Articles of organization or certificate of formation filed with the state.
- Operating agreement: The internal agreement governing the LLC's management and operation.
- Manager or member information: Identification of who manages the LLC and their authority to bind the entity.
- Resolution or authorization: A document showing that the LLC has authorized the specific transaction. Some title companies require a formal resolution.
- Certificate of good standing or status: Evidence from the state that the LLC is active and in good standing.
Avoid This Mistake
One of the most common title issues with LLCs is a name mismatch. If the contract says "ABC Investments LLC" but the formation documents say "ABC Investment Group LLC," the title company will need a corrective document or assignment to align the names. Similarly, if the LLC uses a slightly different name on different documents, it can create questions about ownership and authority.
For more on entity ownership and title, see how an LLC can hold real estate in our existing knowledge base.
Requirements may vary by jurisdiction and transaction. Consult qualified legal, tax, lending, or other professionals for advice on your specific entity structure and transaction.