real-estate limited-liability-company
Can downpayment money be considered initial capital contribution?
<p>If I invest money towards a property via a downpayment, and then form an LLC, would that downpayment money be considered initial capital contribution?</p>
<p>I can't find a clear answer online. It seems like initial capital contribution is for startup expenses, which this isn't (in the sense that I'm not buying offices, or doing advertising, etc.), but I guess if we don't buy the property, then we wouldn't have an LLC, so maybe it counts.</p>

<p>The normal way to do the transaction would be to contribute the downpayment cash to the LLC first, as a capital contribution, and then to have the LLC purchase the real property with that cash and being obligated on the loan primarily (probably with the owner of the LLC as a guarantor).</p>
<p>When you buy the property first and then contribute it to the LLC (which could trigger a <a href="https://www.investopedia.com/terms/d/due_on_sale_clause.asp" rel="nofollow noreferrer">due on sale clause</a> in the mortgage, if there is a mortgage and permission from the lender is not obtained for the transfer to the LLC) then strictly speaking, it is the real property subject to the mortgage, and not the down payment itself, which is the capital contribution to the LLC.</p>
