Can I Borrow Against My Property If It’s In An LLC? 

When a borrower is an LLC (Limited Liability Company), it means that the entity seeking a loan or engaging in financial transactions is not an individual but rather a business entity structured as an LLC. LLCs are a common form of business structure in the United States and many other countries because they offer limited liability protection to their owners (referred to as members) while allowing for flexible management and taxation options. 

Here are some key points to consider when a borrower is an LLC: 

1. Limited Liability: One of the primary advantages of forming an LLC is that it provides limited liability protection to its members. This means that in most cases, the personal assets of the LLC’s members are protected from the business’s debts and liabilities. If the LLC defaults on a loan, creditors generally cannot go after the personal assets of the LLC’s members. 
2. Separate Legal Entity: An LLC is a separate legal entity from its members. This separation is important for legal and financial purposes. It means that the LLC can enter into contracts, own assets, and incur debts in its own name. 
3. Borrowing Capacity: An LLC can borrow money, just like an individual or any other business entity. It can take out loans from banks, financial institutions, or private lenders. The lender will typically evaluate the LLC’s creditworthiness and financial stability before approving a loan. 
4. Personal Guarantees: In some cases, lenders may require the members of the LLC to provide personal guarantees for the loans. This means that if the LLC defaults on the loan, the individual members would be personally responsible for repaying the debt. 
5. Taxation: The taxation of an LLC can vary based on how it chooses to be taxed. By default, LLCs are pass-through entities, meaning that profits and losses pass through to the members’ personal tax returns. However, an LLC can also elect to be taxed as a corporation if it prefers a different tax structure. 
6. Legal Compliance: Borrowing as an LLC involves complying with all applicable laws and regulations related to business finance, including state and federal laws governing LLCs and financial transactions. 
7. Operating Agreement: Most LLCs have an operating agreement that outlines how the company is managed, how profits and losses are allocated, and other important aspects of the business. This document may impact the LLC’s ability to borrow money. 

It’s essential for an LLC and its members to carefully consider their financial decisions, including borrowing, to ensure they are in compliance with applicable laws and that the financial arrangements align with the LLC’s business goals and strategies. Consulting with legal and financial professionals is often advisable when dealing with financial matters involving an LLC.

Safeguard your interests and make well-informed choices with  with our knowledgeable real estate attorneys. Contact Kendall Law at 310-619-4941 today to book a consultation.