LLC, Trust, or Your Own Name? How LA Rental Owners Should Hold Title in 2026

For Owners · Los Angeles · September 2026 · 8 min read

Every few months an owner asks us some version of the same question: should I put the building in an LLC? It almost always arrives framed as a liability question, usually after a near-miss — a slip-and-fall claim, a habitability letter, a lawyer’s demand on someone else’s property that made the rounds at a dinner.

In Los Angeles it is not one question. It is four, and they have to be answered in a specific order: what happens to your property tax basis, what your lender thinks, what your insurance policy says, and what the City and County already have on file about who owns and manages the building. Owners who answer the liability question first and the other three later are the ones who end up with a reassessment notice, a transfer tax bill, or a rent registry entry that no longer matches their rent roll.

The three ways LA owners actually hold title

In your own name (or jointly). The default. Nothing to file, nothing to maintain, no annual fee. Your personal assets and the building’s liabilities sit in the same bucket, and on your death the property goes through probate unless something else is in place.

In a revocable living trust. An estate-planning instrument, not a liability shield. It keeps the property out of probate and lets a successor trustee take over without a court. For tax and creditor purposes you still own it. For most owners of one to four units, this is the move that actually solves the problem they came in with.

In an LLC (or an LP). A liability container. Done properly it separates the building’s exposure from your personal assets, and each building from the others. It costs real money every year and it is the version that interacts badly with an existing residential loan.

Start with Proposition 13, not with liability

The transfer itself is usually not the problem. Under Revenue & Taxation Code section 62(a)(2), a transfer between you and an entity you own is excluded from reassessment when it results solely in a change in the method of holding title — meaning the proportional interests of every owner in every property transferred stay exactly the same before and after. Transfer a building you own 50/50 with your brother into an LLC you own 50/50 with your brother, and the assessor generally leaves your base year value alone. A transfer into a revocable trust you control is likewise excluded.

The tripwire is what happens next. When that exclusion applies, you and your brother become “original coowners” of the entity. If the original coowners later transfer cumulatively more than 50 percent of the LLC interests — over any number of years, to any number of people — the entire property reassesses at current market value under section 64(d). Nothing has to change hands at once. A 20 percent gift to a child in 2027, another 20 percent in 2031, and 15 percent to a partner in 2034 gets you there, and by then almost nobody remembers the original transfer that started the clock.

What an LLC actually protects — and what it does not

An LLC is good at one thing: keeping a judgment arising from the building from reaching assets outside the building. If you own four properties in four LLCs, a catastrophic claim at one does not automatically reach the other three.

It does not protect you from your own conduct. If you personally made the decision that caused the harm — ignored the repair request, did the electrical work yourself, handled the eviction badly — you can be named individually regardless of the entity. It does not protect you from anything you personally guaranteed, which is most residential and a good share of small commercial debt. And it is not a substitute for a real liability policy; it is the thing that sits behind the policy after the limits are exhausted.

It also only works if you treat it as real. Courts disregard entities that were never operated as entities.

The California cost, honestly

Every LLC organized or doing business in California owes an $800 minimum franchise tax every year, whether or not the building made money. Above $250,000 in California-source gross receipts, a graduated fee stacks on top. Add Form 568, a registered agent, an LA City business tax registration, and a bookkeeper who now has one more set of books to close.

Then multiply by the number of single-asset LLCs you were told to set up. Note also what does not work: a Wyoming or Delaware LLC that owns an LA building is doing business in California, registers with the Secretary of State, and pays the $800 like everyone else. The series-LLC structure that out-of-state promoters sell does not map cleanly onto California law either. There is no offshore-adjacent shortcut here; there is only whether the protection is worth the annual carry.

Your lender may have an opinion you have not asked for

Nearly every mortgage contains a due-on-sale clause that lets the lender accelerate the loan if the property is transferred. The federal Garn-St Germain Act carves out transfers into a revocable inter vivos trust where the borrower remains a beneficiary, on residential property of fewer than five units. That carve-out is one of the reasons the trust route is so much easier for small owners.

It does not cover a transfer to an LLC. In practice most lenders never call the loan, and many will consent if asked. But if you are sitting on a 3-point-something loan from a few years ago, that is precisely the loan you do not want to test on a hunch. Ask for written consent before you record the deed, not after.

Insurance follows title — or it quietly stops

If the grant deed says the LLC and the policy still says your name, you have created an argument for an adjuster to have at the worst possible moment. The entity should be the named insured, you should be named where appropriate, and the umbrella has to be re-papered to sit above the right schedule. In a hard LA insurance market this is also a natural moment to discover your limits have not kept up with replacement cost. Handle the endorsement before recording, not in the same week as a claim.

The Measure ULA math nobody runs first

Los Angeles City charges a documentary transfer tax of $4.50 per $1,000 of value on top of the County’s $1.10. Measure ULA adds far more: as of the thresholds that took effect July 1, 2026, 4 percent applies to transfers above $5.4 million and 5.5 percent above $10.9 million, measured on the entire consideration rather than the amount over the line. The thresholds are indexed and move annually. The same tax lands on an outright sale, so if you are weighing a restructure against selling the building, run both sets of numbers with the ULA rate in them.

The LA paperwork that has to follow the deed

This is the part that gets skipped, and it is the part that causes problems in the first twelve months after a change:

• RSO registration and the annual bill — the owner and agent of record have to be updated, or your notices go to a name that no longer holds title.
• Rent registry filings — City and County registries key off the owner of record. A mismatch between the registry, the deed, and your rent increase notices is exactly the defect a tenant’s attorney looks for.
• Leases — assign them; do not rewrite them. A title change is not an occasion to issue new leases, and in a rent-stabilized unit the existing tenancy terms carry forward regardless of who holds the deed.
• Security deposits — the Civil Code section 1950.5 obligations travel with the property to the new owner of record, including the original amounts and the accounting.
• Tenant notices — new owner and agent for service of process, and where rent is now to be paid. Tenants are entitled to know who to pay and who to serve.
• Administrative cleanup — business tax registration, a new W-9 to your property manager, a new operating account, updated ACH and vendor records.

What we usually see work

For an owner with one house or a two-to-four unit building on a residential loan, the revocable trust plus a properly sized liability and umbrella policy solves most of what they were actually worried about, at a fraction of the cost and with none of the due-on-sale exposure. For an owner buying commercially financed multifamily, taking title in an LLC at acquisition is cheaper, cleaner, and avoids every issue in this article.

The expensive version is the one in the middle: converting after the fact, mid-loan, without the transfer tax analysis and without updating the filings. That is the version that generates a bill nobody budgeted for. If you are going to restructure, the sequence is lender consent, transfer tax opinion, insurance endorsement, deed, then filings — in that order.

One more sequencing point. If a 1031 exchange is anywhere in your plans, settle the entity question before you start one rather than in the middle of it. The taxpayer that relinquishes the property has to be the taxpayer that acquires the replacement, and a title change mid-exchange is the wrong moment to find out how your qualified intermediary treats yours.

Frequently asked questions

Will moving my building into an LLC raise my property taxes?

Generally not, if the ownership proportions are identical before and after. The risk is later: once more than 50 percent of the entity interests have cumulatively transferred away from the original coowners, the property reassesses in full.

Is a trust enough, or do I need an LLC too?

They do different jobs. A revocable trust handles succession and avoids probate. An LLC handles liability separation. Plenty of owners eventually hold LLC membership interests inside a trust, which does both.

Do I need a separate LLC for each property?

That is the textbook answer and it is why the annual carry adds up fast. Two buildings and modest equity rarely justifies two entities; six buildings with significant equity usually does. Run the $800-per-year-per-entity math against what you are actually protecting.

Can my lender really call the loan?

Contractually, usually yes on an LLC transfer. Practically it is uncommon, and consent is often available for the asking. The Garn-St Germain protection for revocable trusts on one-to-four unit residential property does not extend to entities.

Do I have to tell my tenants?

Yes. Tenants are entitled to current ownership and agent-for-service information and to notice of where rent is paid. Keep the lease terms themselves intact.

Sources and disclaimer. California Revenue & Taxation Code sections 62(a)(2) and 64(d); California State Board of Equalization Property Tax Rule 462.180; California Franchise Tax Board, Limited Liability Company Tax Booklet (Form 568); Los Angeles Office of Finance, Real Property Transfer Tax and Measure ULA; 12 U.S.C. section 1701j-3 (Garn-St Germain Depository Institutions Act); IRS Instructions for Form 8824 (like-kind exchanges); California Civil Code section 1950.5; Los Angeles Housing Department Rent Stabilization Ordinance registration requirements. Bessa Properties is a property management company, not a law firm, tax advisor, or insurance broker. Entity selection, transfer tax exemptions, property tax reassessment, and lender consent are fact-specific and carry real financial consequences. Consult a California real estate attorney and a CPA before transferring title. Rules, thresholds, and fee schedules change; figures are current as of September 2026.