New Berlin, WI · Member since 2013 · 7 posts · 2 votes
I own 3 buildings each under their own LLC. I did this to limit the loss should any lawsuit arise.
I also manage these buildings myself, and now I am reading that if there is an issue, the tenant could sue the LLC and me as the manager, thereby getting around the LLC wall and into my personal finances.
Should I then set up an LLC just for management? Should I set up an LLC and then pay myself? Or is this getting overboard?
First place to start by defining and identifying what you want to do, specifically.
One aspect of attacking a business entity is to say that the business was operating outside its stated scope of work or its mission. The catch all "and to do all other things usual and customary as allowed by law" really doesn't cut it literally.
You should avoid using RE buzz words or investor terminology like "wholesale" "birddog" "Lease-Option" as these terms are unique and opens the door to other determinations. Use something more like, buy, sell, lease, manage, repair, rehabilitate, develop, construct and finance residential and commercial real estate. then use that catch all of all other things. This will better define that catch all phrase to those specific areas, what is customary in selling or financing.
You may think that your company will be a one member LLC, you caet it up that way but leave the door open to admit other members, consider how profits may be paid out, the voting rights of others, such rights can be limited, do you have a manager or will all members be active in operations.
You need to look at the default provisions by state law as to what happens under different events and if that's how you want it to work you can go with that or you can specify different provisions so long as they are not contrary to law.
Think ahead, years down the road as to where you might be, what you might do, as some long term considerations will help draft a better entity. You can always amend articles and the operating agreement, change tax elections (under restrictions) but it will cost you money and time to do so, it may effect accounting or other aspects of operations in trying to make changes in the future. Providing greater flexibility in the beginning is the best way to go.
What you get from instantlegalforms.com won't be as good as a well thought out plan, speaking to a generalized attorney will be a toss up as to who you luck out with. Many of these cut rate legal service types will, in my opinion, will be new attorneys, those struggling for business, intern types or old retired guys that may lend experience from 15 years ago. I just can't imagine an expert RE attorney or corporate attorney working for the pittance paid through cut rate legal services. And, while they may be in your state, if they aren't in your jurisdiction, they won't be so aware as how things are viewed in your area.
I'd say you're going overboard and doing a management LLC could cause other issues. The best defense is good management, next is insurance, then such strategies. You might talk to an attorney and probably not the one that set you up in three LLCs. :)
I did and do all my own lawyering. I have read that each building should be in each own LLC to insulate them from another. Its not expensive here in WI, and I see it as an insurance policy. Am I mis-informed?
I do try to be a good manager, but I still have a real job and am not the most handy of all people. There may be some bad electircal work that a good manager could have seen and fixed, etc.
Have you looked at legalzoom? I established my LLC through them and it cost around $100. Also, you can speak to an attorney by phone on an unlimited number of new personal or business legal matters for around $25 per month. It's not a bad deal and the service is very comparable to the traditional attorneys.
First place to start by defining and identifying what you want to do, specifically.
One aspect of attacking a business entity is to say that the business was operating outside its stated scope of work or its mission. The catch all "and to do all other things usual and customary as allowed by law" really doesn't cut it literally.
You should avoid using RE buzz words or investor terminology like "wholesale" "birddog" "Lease-Option" as these terms are unique and opens the door to other determinations. Use something more like, buy, sell, lease, manage, repair, rehabilitate, develop, construct and finance residential and commercial real estate. then use that catch all of all other things. This will better define that catch all phrase to those specific areas, what is customary in selling or financing.
You may think that your company will be a one member LLC, you caet it up that way but leave the door open to admit other members, consider how profits may be paid out, the voting rights of others, such rights can be limited, do you have a manager or will all members be active in operations.
You need to look at the default provisions by state law as to what happens under different events and if that's how you want it to work you can go with that or you can specify different provisions so long as they are not contrary to law.
Think ahead, years down the road as to where you might be, what you might do, as some long term considerations will help draft a better entity. You can always amend articles and the operating agreement, change tax elections (under restrictions) but it will cost you money and time to do so, it may effect accounting or other aspects of operations in trying to make changes in the future. Providing greater flexibility in the beginning is the best way to go.
What you get from instantlegalforms.com won't be as good as a well thought out plan, speaking to a generalized attorney will be a toss up as to who you luck out with. Many of these cut rate legal service types will, in my opinion, will be new attorneys, those struggling for business, intern types or old retired guys that may lend experience from 15 years ago. I just can't imagine an expert RE attorney or corporate attorney working for the pittance paid through cut rate legal services. And, while they may be in your state, if they aren't in your jurisdiction, they won't be so aware as how things are viewed in your area.
Another good resource: "How to Use Limited Liability Companies & Limited Partnerships" by Garrett Sutton. Regarding "You need to look at the default provisions by state law as to what happens under different events..." this is absolutely essential. Read and understand your state law for LLCs. This prerequisite is not negotiable, IMO.
No matter if you have your proprieties in a LLC, CORP it is not hard to find out who the owner of the LLC, CORP is. I am no expert but doing normal business hours it would only take me about 2 hours to know who the owner is. Your best bet is a good insurance policy.
While Joe tries to play mind games, with an ex-intelligence guy, there is no way to know who may have an equitable interest in any LLC. Set up properly, you'll never be in the public domain.
Ryan, yes, BP is full of posts on LLCs, use the search function :)
Joe, lets get this stuff in the open. Did I ever cause you to go to jail, were you ever a banker that I caught doing something wrong? Why have you been hounding me, attacking me, what is your problem? Do you just hate bank examiners?
Mostly, you're nothing but a smart azz on this site, a know nothing, who attempts to intimidate by snide and rude remarks.
You're also a coward in my book, if you have some issue with me personally, get it off your chest and step out like a real man.
You want to dance with me? Really? Open your mouth and look like a fool? You don't make a pimple on my back side on your very best day.
You don't tug on super man's cape or spit in the wind, you want to play games? I'll buy and sell you and throw the change away. Who the hell do you think you are.......?
I step on roaches. Don't ever insinuate a threat toward me again. Go sell your cars.
OP: I do try to be a good manager, but I still have a real job and am not the most handy of all people. There may be some bad electircal work that a good manager could have seen and fixed, etc.
@Ysanne,
Proper entity structure for your business along with the right insurance is key. Additionally you need to know when to delegate certain tasks. If you are the property manager and there is an electrical issue yet you aren't a licensed electrician and attempt to make repairs that result in harm or death of a tenant than you are most certainly liable in every way regardless of your entity structure & insurance. Instead of hoarding every red cent think smarter and hire licensed professionals to fix mechanical issues. Its all tax deductible. Otherwise continue to risk your business and personal finances on top of a potential prison sentence...
No one is attacking you; I just don't agree on things you say, and you don't agree what I say. If you cannot stand the heat stay out of the kitchen. From here on out don't respond to my posting if you do I will consider it a threat, and I know all about you, but I want post it in the open forum.
@Account Closed easy to say Joe, don't know how this is any threat, easy way out I guess, what ever you got, bring it on my friend, that's the underlying intimation I was speaking of, as if you have something. My life has been out there, and you speak as if there is something to hide, there isn't. So, you got nothing!
No, I guess we don't agree on much here. I'd suggest the reason we don't agree is because, for some reason you really don't like me, personally it's not because you have greater knowledge on any subject, you just want to disagree. :)
Really, I'm kinda wondering if you were hired my my old ex-wife Joe, are you an investigator? My first one is really hateful, I wouldn't put it past here, LOL.
Whatever Joe, you don't dictate when I can post and I really could care less how you take it. Have a great evening.
Ouuuu! Me too Joe. Let's take this to the Off Topic Forum, we are off topic here messing up the OP's thread. We can start one Joe vs Bill or Bill vs Joe. I'll bet my "agency" (not FDIC) unit coin as to who wins that, nice little bet for you? I'm retired Joe, I'd say you only think you know. See you inthe Off Topic Forums Joe, if you're up for it. :)
Ysanne,
No matter if you have your proprieties in a LLC, CORP it is not hard to find out who the owner of the LLC, CORP is. I am no expert but doing normal business hours it would only take me about 2 hours to know who the owner is. Your best bet is a good insurance policy.
Joe Gore
@Account Closed and @Bill Gulley , I've offered up a question (actually 2 questions) for you elsewhere:
All I will say if you are the owner of the LLC that have proprieties hiding behind the LLC any smart investigator can find you regards if your name is attach it is a old police trick that been working for years.
Bringing the thread back to center: each property should definitely be it's own LLC, conventional lenders and often insurers usually require this anyway (loan documents often call for the creation of a special/sole purpose, bankruptcy-remote entity).
Should there be a lawsuit, the LLC would of course be named, and you as manager. IT DOESN'T MATTER if they know your name or not. You'll just be referred to as "LLC Manager" or something similar. It won't breach the wall and reach into your personal finances/domain, if you're being sued as the manager. That doesn't mean that they couldn't sue you individually as well, but with competent counsel, that suite ought to be thrown out pretty quickly.
If someone does sue the LLC and name all the unknown John Does that belong to the LLC and all it will take is the party that is suing to do discovery under oath, and that will open the door to get to the owner.
So what if the plaintiff knows the owner's name? If it's anonymity someone wants, they should take tips from Gene Hackman's character in "Enemy of the State," not be the principal in a legally registered entity.
Suing someone as an individual and suing them as the manager of an entity are two, totally separate things. That's why LLC's are bankruptcy-remote, can own property, etc. They stand on their own. A tenant may sue the entity, and [you as] the manager, but that's not remotely the same thing as suing you as an individual.
My prior post was written, really, only to alert those who may care, that just because someone doesn't know your name, doesn't mean that you can't be sued.
Let's say you are a tenant living at ABC apartments you would name ABC apartments/LLC that the apartments hiding behind when you sue if ABC doesn't have insurance. If there is insurance, you go after the insurance.
That makes a lot of sense. My LLC has way more insurance than I do, so it would makes sense for them to go there. A funnel rather than a shield, but still I see its value.