BiggerPockets

I had already started a thread on this topic above before I saw this. There are a lot of posters in this thread I respect. The answer we all need the most is to know how often the "veil is pierced" in LLCs. Rob and I are in the same state of Michigan so I was glad to see his answer. Is there a way to research at a law library or a court as to the effectiveness of LLCs in protecting business owners in ACTUAL lawsuits?

Here is the website I used in my first psot that takes a negative view with LLCs. http://www.johntreed.com/entity.html

After getting my feet wet in investing over the last 5 years in NY and PA here is what I have come up with.

Set up your LLC(s) ahead of time, so when you purchase property you can have it titled to the LLC from the get go. It is costly (more so in PA that NY) to transfer afterwards. All that does is reduce your ROI. We're in this to make money, so get one set up and start using it. When you hit your equity threshold start another entity. For example. LLC A may hold 10 properties valued at 1MM, but which are leveraged at 90% LTV leaving 100,000 in equity that could be attacked. You can tweak that number depending on your personal risk tolerance.

I have had no problem getting landlord insurance for property titled in an LLC, the LLC members are named as additional insured.

I created an LLC to do the management and I have also created an LLC to do the repairs and maintenance. They are both multimember LLCs as opposed to single member. I give small percentages to various family members to prevent them from ever being lumped together in court. You want the companies to seem as different as possible. If they are all single member LLCs with just you, it won't really help. If they are all multimember LLCs with different people and different ownership percentages you'll be in much better shape IF anything ever happens.

The management company bills back a monthly fee to the owning entities and deals with lease ups, paper work, advertising, bill paying etc.

The construction company provides all repairs and maintenance and bills the owning entities directly.

Hope it helps!

@Steve Might Check out this thread from a couple weeks ago.

http://www.biggerpockets.com/forums/52/topics/78884-has-a-tenant-or-former-tenant-ever-sued-you

I asked this because everyone is so paranoid about lawsuits and afraid that they will "lose everything." While I didn't think there would be any posts of people who lost everything when their tenant drowned in the bathtub, I did expect to hear more higher dollar lawsuits. None of the lawsuits that werre mentioned would have made a difference if it was an LLC or in their own name.

Check it out. There were some interesting posts.

I just wanted to add a few points...

1) For those who were looking at the percentage of LLC's which were pierced does not tell you how effective they are. It is entirely dependent on your state's laws, entity structure, and adherence to corporate formalities.

2) I dont think anyone would suggest having an LLC instead of insurance. You should have both imo. Another problem with sole reliance on insurance companies is their frequent refusal to pay claims, then requiring you to deal with two lawsuits, one to defend yourself, then another to sue the ins co.

3) Corporate entities also provide additional tax sheltering benefits.

4) Provide vehicles for protecting & transferring wealth to family.

5) Provide protection of your investment assets from personal lawsuit (You are sued from an automobile accident).

6) Provide privacy (though not complete I must add).