When property is owned by an entity — an LLC, corporation, trust, or partnership — rather than an individual, the sale process has additional layers. The entity's governing documents dictate who can authorize a sale. Tax treatment differs from individual ownership. The contract must be signed by authorized representatives. And in some cases, selling the entity's membership interests (rather than the property itself) is a more tax-efficient strategy.
This guide covers the key considerations for selling entity-owned real estate in New York, whether the entity was formed for investment purposes, asset protection, estate planning, or business operations.
LLC-Owned Property
LLCs are the most common entity type for holding real estate in New York. To sell property owned by an LLC, you need authority under the operating agreement — typically a vote or consent of the members or managers. Single-member LLCs are straightforward (the sole member authorizes the sale). Multi-member LLCs may require majority or unanimous consent depending on the operating agreement.
The contract is signed by the authorized member or manager on behalf of the LLC, not in their personal capacity. The deed is executed by the LLC. Your attorney should verify that the signing authority matches the operating agreement's requirements and that the LLC is in good standing with the New York Department of State.
Trust-Owned Property
Property held in a revocable living trust is sold by the trustee, who has authority under the trust instrument to buy, sell, and manage trust assets. If you are the grantor and trustee of your own revocable trust, you have full authority to sell. If you are a successor trustee (the grantor has died or become incapacitated), your authority comes from the trust document and may have specific requirements or limitations.
Irrevocable trusts have more restrictions. The trustee's authority is defined by the trust document, and selling trust property may require court approval, beneficiary consent, or satisfaction of specific conditions. Tax treatment of trust property sales differs from individual sales — the trust may owe capital gains taxes at compressed trust tax brackets unless the gain is distributed to beneficiaries.
Corporate-Owned Property
When a corporation (C-corp or S-corp) owns real estate, a sale typically requires board of directors' authorization through a corporate resolution. If the property represents substantially all of the corporation's assets, shareholder approval may also be required. The corporation signs the contract and deed through its authorized officers.
Tax implications for corporate-owned property sales are significant. C-corps face double taxation — the corporation pays tax on the gain, and any distribution of proceeds to shareholders is taxed again as dividends. S-corps pass the gain through to shareholders' personal returns, but depreciation recapture and state tax treatment create complexity. Corporate real estate sales almost always require tax professional involvement.
Partnership-Owned Property
General and limited partnerships own significant real estate in New York. Selling partnership property requires authority under the partnership agreement. In a general partnership, all partners may need to consent. In a limited partnership, the general partner typically has authority to sell, subject to any limitations in the partnership agreement.
Partnership property sales involve unique tax considerations. Each partner recognizes their share of the gain or loss based on their partnership interest and basis. Partners who have taken depreciation deductions will face recapture. The partnership's Section 754 election (if made) affects how the gain is allocated. These calculations require an accountant experienced with partnership tax.
Asset Sale vs. Entity Sale
When selling entity-owned property, you have two structural options: sell the property itself (asset sale) or sell the entity's ownership interests (entity sale — selling LLC membership interests, corporate shares, or partnership interests). Each structure has different tax implications, liability considerations, and practical effects.
An entity sale may avoid transfer taxes (since the property does not change hands — only the entity's ownership does), provide better capital gains treatment for sellers, and simplify the transaction. However, the buyer inherits the entity's liabilities, which may deter buyers or require additional due diligence. Your attorney and tax advisor should evaluate both structures for your specific situation.
How Hudson River Realtors Can Help
Entity-owned property sales require agents who can work with attorneys, accountants, and multiple stakeholders. Hudson River Realtors connects you with agents experienced in entity property transactions in the Hudson Valley — agents who understand the documentation requirements and can coordinate with your professional advisors.
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