protection of property

If a family farm is put into llc sole proprietorship, is it protected from nursing homes and any other sources?

Can the llc be given to children with no tax consequences upon the death of the sole owner?

These questions pertain to the State of Pennsylvania.

Answer

An LLC and a sole proprietorship are completely separate things...there is no such entity as an "llc sole proprietorship".

Assuming the farm is placed into an LLC, creditors of a member may be restricted in attacking the assets of the LLC. The protection of the LLC's assets from the creditors of the members is called "outside-in" protection.

This protection is strongest when you have multiple member LLCs. Single member LLCs can be vulnerable if a creditor of the sole member is trying to get at LLC assets (particularly if the single member ends up in bankruptcy).

On the other hand, single member llcs are very good at protecting the member's personal assets from business creditors (called "inside-out" liability).

There are always tax consequences for property transferred on death. Now, if the property is transferred during one's life, then there are obviously no consequences upon death. Therefore, if the property is put into an LLC, and then shares of the LLC sold or gifted to your children, then if all the shares are transferred before death, the farm will not be part of your estate.