BiggerPockets

@Lola Brin,

Here is the issue of still using your SSN after transferring it to the LLC. That is intermingling records. Either the transactions are done under the LLC or they are not. So yes, most attorneys will probably tell you not to bother with the LLC if you still plan to use your SSN. The Title doesn't mean anything if YOU are not treating it as a SEPARATE business that it is. That is where the problem comes.

Also, yes you should have a separate checking account for every LLC in order to keep from intermingling the funds between them.

Summary: If you want to be able to treat it as a separate entity, you must treat it as such.

-Steven

@Lola Brin , @Steven Hamilton II is right on track.....
This goes back to the structure/foundation of why to even form an LLC.
If you are going to be just "piddling" around with real estate...maybe using a DBA and your own SSN is OK...but let's face it..the reason for even having an LLC is for protection...not for tax purposes...
So...make it real...get the LLC..the EIN is free...let me repeat...FREE....why get an LLC and not utilize making it real with an EIN?
When you are a sole proprietor, (single member LLC) you file a Schedule C, and you pay 13% self employment tax, and, if you are like me you pay 31% on top of that on what you pay yourself, which goes to help support those loser deadbeats that won't work but get the free Obamaphone...
The purpose of the EIN is as you send out 1099's, and as you need to establish accounts with suppliers, they have your info, so the IRS can track your every move.
If someone files suit against your LLC, you don't want your SSN attached to it.
so...it comes down to one word...
Separation...

@Lola Brin,

Does that all answer your question? Please don't hesitate to ask us if you have any other questions.

-Steven

Originally posted by Lola Brin:
This is crazy. I have filed for the LLC for each property, obtain the EIN, changed the name of the deeds to reflect the LLC using a Special Warranty deeds, opened individual checking accounts for each LLC. Now I'm working with property insurance and they have the insured as my husband and I and the LLC under Additional Interest.

We only are going to have our 3 properties and they are our retirement pension. We use the income to live off of. We want to protect ourself from any liability but not sure how the insurance works because an individual LLC is not considered a business, the IRS considers it a non-entity but for liability it does protect you but if the insurance companies handle in this manner does this defeat the whole effort. I would love some feedback regarding this issue. Thanks so much

Lola,

For what it's worth, an employee at IRS told me that the IRS treatment of the LLC as a disregarded entity occurs at the federal level, so it doesn't affect the veil piercing/charging order protection issue which takes place at the state court level.

The owner must be the insured. Who is the owner - the name on the deed / title. Once you have a change in the name on the deed, then your new owner will need to be insured.

If your insurance agent or company doesn't want to insure, then you should seek out an insurer that will cover LLC ownership - not all insurance companies want to insure property of LLC.

Originally posted by @Lola Brin:
based on my research, none do unless you get a commercial policy. Additionally, the only way they will is to insure the individual and add the LLC as an additional interest/insured. Again this is on a personal property insurance. My understanding anyone that does an individual LLC this is the way insurance company handle it. I'm in Colorado so not sure if this is a state issue.

Lola Brin

I have mine set up that way with the insurance (my name as the primary insured, LLC listed as additional insured). My impression is that a number of others on this forum do this as well. Maybe I'm whistling past the graveyard, but my impression is that the most important veil-piercing issues are 1) not using LLC bank account for personal expenses 2) signing documents properly 3) not using LLC to commit fraud

When you say "individual LLC" are you referring to a single member LLC or an insurance policy that is personal rather than commercial?

I've been told you can't put multiple LLCs under one umbrella--if you want to do the umbrella you need to do a separate one over each LLC. Which is why I don't bother with an umbrella on my one LLC'd property.

You may be overthinking the insurance issue. If the carriers' rules state that the person must be the primary and the LLC Additional Insured, then large numbers of landlords in your state must be doing it this way. I doubt a judge would allow the veil to be pierced because of a standard practice in the insurance industry in your state. I think sloppy business practices would be a more likely avenue of piercing, which is why you should not do one bank account for more than one LLC.

Since you are already working with an attorney, maybe you should ask him or her about the veil piercing/additional insured issue. Most of us are not in Colorado so our advice may not apply to your situation.

@Lola Brin Have you called and spoken with insurance companies or only googled it? My LLC is the primary and I'm second.

Originally posted by Lola Brin:
Both companies and Internet. Liberty Mutual is checking to see if they can change this. I'm keeping my fingers crossed. Thanks everyone for your help.

Well I hope you do not end up paying more for that insurance policy or being trapped at that carrier forever just because they are are the only one who will place the LLC's name as the primary on the policy...

Has anyone verified that this is a real LLC veil-piercing issue, that it has actually been a successful tactic in court?

Thanks so much. I did read this when I was researching. I would agree with you logically that if you are maintaining separate records, personal and rental moneys separate that is the main thing. My attorney is out of the country for the holidays so I'm in limbo. I believe that if the insurance company treats the LLC as an owner and covers claims that it should work. Stay tuned......