## Facts

- Lena Hausman executed a will distributing her residuary estate among her son, her daughter, and seven grandchildren; she owned real property in Brooklyn, New York.
- Her son executed articles of organization to form a limited liability company intended to own the property, and he and the daughter signed an operating agreement naming themselves the sole members.
- The decedent executed a deed transferring the property to the LLC.
- The LLC’s articles of organization were not filed with the New York Department of State until two weeks after the deed was executed.
- After the decedent’s death, a dispute arose over whether the pre-filing deed validly transferred title to the LLC.

## Issues

1. Whether a deed conveying real property to an LLC is valid when executed before the LLC’s articles of organization are filed and the LLC therefore did not legally exist at the time of conveyance.
2. Whether a “de facto” LLC may be recognized to validate the conveyance absent a colorable attempt to comply with statutory filing requirements before the deed.

## Decision

- The appellate court reversed the Surrogate’s Court order that had deemed the deed valid.
- The court held that no de facto LLC existed at the time of the conveyance.
- The court denied the executor’s petition and deemed the deed invalid, with costs.

## Legal Principles

- A purported entity that is not yet in legal existence cannot take title to real property.
- An LLC comes into existence upon filing its articles of organization with the Department of State, not upon execution of private formation documents.
- De facto entity status requires, at minimum, a bona fide or colorable attempt to comply with statutory formation requirements (including filing) before the transaction at issue.
- Where no such pre-transfer filing attempt is made, a deed to the not-yet-formed entity is ineffective to convey title.

## Conclusion

Because the LLC had not been formed by filing articles of organization at the time the deed was executed, and there was no prior colorable attempt to comply with the filing requirement, the purported conveyance to the LLC was void and the property remained in the decedent’s estate.


In re Hausman, 51 A.D.3d 922, 858 N.Y.S.2d 330 (App. Div. 2d Dep’t 2008)