Investor · San Jose, CA · Member since 2011 · 355 posts · 90 votes
I bought a couple of properties in the name of my LLC, but then I got to thinking:
What ties me personally to my LLC? If I look on the original LLC application it has the name of my attorney. What's to stop my attorney (theoretically) from claiming the LLC as his own?
Your operating agreement outlines the ownership of your LLC, not the document that you filed with the state. For instance, my partner is not on the public document, but his ownership % is detailed in the operating agreement.
With regards to creating a ficticious operating agreement, I would think someone would contest that you are not the owner....
Just because a document isn't public doesn't mean that it isn't binding.
Do you have an operating agreement that outlines the purpose of the LLC? This should state pretty clearly who the owners are, how it was formed, what it's purpose is, etc.
How does the application look? It should have your attorney listed as an agent or something of the sorts, basically says he's setting it up for you, but you should be listed as the Owner.
I've got an operating agreement, but that's not a publicly recorded document. I've got a copy and my attorney has a copy - but who's to say we didn't just make those up to steal somebody else's LLC?
The application just has my attorney listed as the organizer. My name isn't on it.
I guess what I'm getting at is this:
With Real Estate ownership it's very straightforward. There is a public document that says "Owned by XYZ. If you aren't XYZ, you can't have it."
I'm trying to find something like that for LLC ownership.
What if I die - for example - and I haven't told my family about the business. It continues running itself for a year or two, but then needs attention or the cash is just building up in the account. How and at what point would my family ever know about it?
Your operating agreement outlines the ownership of your LLC, not the document that you filed with the state. For instance, my partner is not on the public document, but his ownership % is detailed in the operating agreement.
With regards to creating a ficticious operating agreement, I would think someone would contest that you are not the owner....
Just because a document isn't public doesn't mean that it isn't binding.
Suppose that somebody tried to sell my property to somebody else without my knowing about it. The title company would look and see that it's owned by ACME LLC (my real LLC). Further suppose that the dirty "seller" produces an operating agreement with their name on it along with ACME LLC.
How does the title company see that this person is wrong? Please assume that I - as the rightful owner of the LLC - have no idea at any point that this is taking place.
The title company has an examiner that examines the document. They insure based on this examination and presumably assume the risk associated if someone fraudulently "sold" the property.
Well, kinda. Assuming that I know when it happens. What if I die without telling my loved ones anything about the property?
I guess I'm just struggling with the fact that there doesn't seem to be a lot of tangible connection between me and my property.
The thing that brought this to mind for me was that on the LLC application my attorney is listed, but nothing about me. I wondered if it would be possible for him to later claim my stuff.
The "your stuff" is your ownership percentage in the LLC. The secretary of state has a record of the entity.
If you die without telling your loved ones anything about the property anyone can look up who owns the property and associate the title with your entity. They could then examine the operating agreement to see what your interest is.
I'm not following what you are concerned about. The tangible connection is from the deed to your property to your LLC and then from your LLC to your personal interest.
The closing attorney will need to see your articles, which only list your attorney's name. I believe he will then need to sign a resolution giving you (or other members) signing rights for the sale based on your operating agreement. At least that's how I understand it. I just filed our articles with my name and my partner's as the organizers so there's no doubt. Maybe you could file an amended one.
"... and then from your LLC to your personal interest."
That's exactly the part I'm concerned with. What's the hard link there? The only public document I know of doesn't show my name - it shows some other guy who happened to be my attorney at the time. (Don't get me wrong, I trust the guy, but I want to understand the principle)
Michael: When you bought the property YOU provided the title company with an operating agreement showing YOU as member of the LLC, and they issued title insurance based on that. YOU might be the agent for service showing on the secretary of state's website, if not you, your agent for service will have records of you as owner. All the money flow for rehab/maintenance/management comes from a bank account showing your name.
It would be a pretty hard sell for your attorney to claim ownership with such a big trail showing your involvement. If your heirs are totally in the dark about your activities that could be a problem. You should have some records your heirs (or their attorney) could pick up and figure out what's going on.