How to set up LLC structure for current/future properties
Brad NeihardtPro Member
Member since 2021 · 7 posts · 5 votesHow to set up LLC structure for current/future properties
Most Popular Reply
Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
1y@Brad Neihardt several points to clear up some misconceptions.
1) Business credit is not that important in real estate. Loans will be made on your personal credit and the deal.
2) you may never get to the point you won't have to personally guarantee a loan.
3) An LLC for each property is generally considered overkill. There is a high cost in both time and dollars due to the complexity you add.
4) if you wanted to hold the property in an LLC you should have bought it in the LLC to start. This is not an insurmountable problem but it can have issues like a due on sale clause of any loan or losing your title insurance.
5) An LLC is the last resort for liability. Running your business properly and knowing and following the laws is first, then comes insurance then comes the LLC. An LLC is a good idea for many, but it is not perfect liability protection.
27 Replies
- Lender · CA · Member since 2018 · 635 posts · 393 votes1y
If you are investing in residential real estate (1-4 unit residential) and are closing in an LLC for DSCR or other NonQM products, you will always have a personal guarantee regardless of business credit. I cannot speak to the legal side of things for structuring an LLC but just wanted to make that clear. There are very few true non recourse lenders in the space and most involve purchasing the property inside of an SDIRA at fairly low leverage (like 60% or less in most cases from what I have seen). I would also highly recommend consulting with a good real estate attorney who can help you structure the LLCs. From my understanding, there is not a ton of liability protection nor tax benefit from having an LLC in most cases (depends on your overall income and financial situation and varies by person). For most investors, a good umbrella policy is going to be far more effective from a liability perspective than anything else. Just my 10 cents.
- Accountant , CPA, MBA in Finance, MS in Taxation · Redmond, WA · Member since 2025 · 172 posts · 135 votes1y
The classic structure is set up a "mothership" LLC. Sounds like you'll own that at the start and maybe throughout the holding periods. So this is a single-member LLC treated as a disregarded entity.
Then the "mothership" LLC sets up and owns individual "child" LLCs for your properties: the "Baltic Avenue" LLC, the "Mediterranean" LLC, the "Park Place" LLC, the "Boardwalk" LLC etc. Each of these will also be single member LLCs (the member will be the mothership) and so also treated as a disregarded entity.
Above structure avoids needing file partnership returns and keeps the tax accounting very simple. (For the tax accounting, the LLCs disappear.) You'll want to confer with local attorney to assess how much liability protection an LLC and especially a single member LLC provides. And whether the juice is worth squeeze.
- 1yStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@Brad Neihardt Go ahead and create an LLC, nothing wrong with that but don't expect the LLC to eliminate your need to guarantee debt. Lenders will look to you to personally guarantee real estate loans irrespective of whether the property is purchased as an LLC. Utilize a business credit card and fail to make payments? Expect to see this on your personal credit report (normally after 3 months of non payment).
- USA · Member since 2023 · 145 posts · 84 votes1y
Congrats on the first property! It really depends on your goals, financing plans, and how hands-on you want to be. Some investors set up a holding company with separate LLCs for each property to isolate liability and stay organized. That said, I had a client who originally used a holding LLC with separate entities but dissolved it because it became too administratively burdensome. They switched to one LLC with one bank account for multiple properties and tracked each property separately in QuickBooks—essentially reviewing each one as its own column in Excel each month.
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes1y
@Brad Neihardt several points to clear up some misconceptions.
1) Business credit is not that important in real estate. Loans will be made on your personal credit and the deal.
2) you may never get to the point you won't have to personally guarantee a loan.
3) An LLC for each property is generally considered overkill. There is a high cost in both time and dollars due to the complexity you add.
4) if you wanted to hold the property in an LLC you should have bought it in the LLC to start. This is not an insurmountable problem but it can have issues like a due on sale clause of any loan or losing your title insurance.
5) An LLC is the last resort for liability. Running your business properly and knowing and following the laws is first, then comes insurance then comes the LLC. An LLC is a good idea for many, but it is not perfect liability protection.
- 1yJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
wyoming trust
that trust owns a wyoming llc
that llc owns the domestic llc of the state youre operating in
Frontier Funding LLC533 Reviews - 1yStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@Brad Neihardt appears to have bought his first property in Cleveland. Without knowing anything about Brad and not wanting to make assumptions, lets replace Brad with "Investor A", the person most likely to buy residential or small multi-family properties in Cleveland to match the profile of the normal Bigger Pockets member who invests in this market. @Jake Yuskaitis What is the benefit of the Wyoming Trust and Wyoming LLC? Is it the charging order protections? Is it the anonymity? Does Investor A have assets worth the pursuit of a plaintiff's attorney if insurance does not cover the harm?
Let's be honest with ourselves, if Investor A finds themself in conflict it's most likely going to be landlord tenant related, a premises liability claim or a payment/performance related dispute.
Landlord/tenant matters notwithstanding premises liability type claims which are discussed below are generally settled in local municipal level courts because the controversy amount is low. If investor A fails to meet the implied warranty of habitability and tenant withholds rent how do the Wyoming trust and LLC help?
If Investor A stiffs a contractor, do you believe the contractor is going resolve the matter in WY? No, the contractor is simply going to place a mechanics lien on Investor A's property clouding title until the property is sold or refinanced.
If it's a premises liability matter and falls outside of general liability coverage, do you really believe the plaintiffs attorney who is likely working on a contingent fee basis cares to pursue the claim against the defendant regardless of whether there are real asset? Why do you believe case law has been established allowing attorneys to collect upwards of 20% of the defaulted debt amount in confession of judgment cases in states that allow the filing? Turning that judgment into cash takes time and is costly.
Never mind the fact the investor now likely has a lousy loss run rate if there are premises liability claims, is reliant on expensive surplus line insurance coverage and when lenders review his entities they see someone who is reckless with claim history, mechanics liens (doesn't pay their bills) ...hardly the person a lender wants to do business with. It's about time real estate investors recognize the true risks and consequences of their actions and operate in a manner that allows for a sustainable business. Most throw money away on useless asset protection systems that aren't relevant and provide no benefit.
- 1yJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votesyes the anonymity is a protection of course. and the charging order protection. have no idea why you would consider it bad advice.
Quote from @Stuart Udis:
@Brad Neihardt appears to have bought his first property in Cleveland. Without knowing anything about Brad and not wanting to make assumptions, lets replace Brad with "Investor A", the person most likely to buy residential or small multi-family properties in Cleveland to match the profile of the normal Bigger Pockets member who invests in this market. @Jake Yuskaitis What is the benefit of the Wyoming Trust and Wyoming LLC? Is it the charging order protections? Is it the anonymity? Does Investor A have assets worth the pursuit of a plaintiff's attorney if insurance does not cover the harm?
Let's be honest with ourselves, if Investor A finds themself in conflict it's most likely going to be landlord tenant related, a premises liability claim or a payment/performance related dispute.
Landlord/tenant matters notwithstanding premises liability type claims which are discussed below are generally settled in local municipal level courts because the controversy amount is low. If investor A fails to meet the implied warranty of habitability and tenant withholds rent how do the Wyoming trust and LLC help?
If Investor A stiffs a contractor, do you believe the contractor is going resolve the matter in WY? No, the contractor is simply going to place a mechanics lien on Investor A's property clouding title until the property is sold or refinanced.
If it's a premises liability matter and falls outside of general liability coverage, do you really believe the plaintiffs attorney who is likely working on a contingent fee basis cares to pursue the claim against the defendant regardless of whether there are real asset? Why do you believe case law has been established allowing attorneys to collect upwards of 20% of the defaulted debt amount in confession of judgment cases in states that allow the filing? Turning that judgment into cash takes time and is costly.
Never mind the fact the investor now likely has a lousy loss run rate if there are premises liability claims, is reliant on expensive surplus line insurance coverage and when lenders review his entities they see someone who is reckless with claim history, mechanics liens (doesn't pay their bills) ...hardly the person a lender wants to do business with. It's about time real estate investors recognize the true risks and consequences of their actions and operate in a manner that allows for a sustainable business. Most throw money away on useless asset protection systems that aren't relevant and provide no benefit.
Frontier Funding LLC533 Reviews
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes1y
Thank you @Stuart Udis for another good post calling out bad advice.
- 1yJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
Quote from @Ned Carey:
Thank you @Stuart Udis for another good post calling out bad advice.
it wasn't bad advice
Frontier Funding LLC533 Reviews
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes1y
Quote from @Brad Neihardt:
I have recently acquired my first property. Looking for help/advice on setting up LLC structure for this property and future properties. I want to be able to build business credit so in the future I don't have to provide a personal guarantee. I also want to isolate each property in its own LLC for liability purposes.
The first property I purchased over 20 years ago was a multifamily building. I obtained the loan in my name but set up an LLC to manage the property. Tenants were informed that the building was now under new management, and all rent payments were made to the LLC. Although I lived on-site, the residents were unaware that I was the actual owner. That LLC, over time, developed a modest management track record.
In hindsight, while I didn’t pursue it, I later realized I could have used that track record to begin building business credit. It likely wouldn’t have been enough on its own to acquire additional properties at the time, but it would’ve provided a solid starting point.
As for protecting your properties, it may be too late to fully isolate your first one if it’s already recorded in your name, since ownership is now part of the public record. In my experience, and based on strategies we’ve implemented over the years, the key is to close on the property using the appropriate entity from the beginning to ensure proper separation and protection.
I recommend you look into the following strategies:
-
Holding Companies
-
Incorporating in states like Wyoming, Delaware, or Nevada
-
Using Land Trusts Effectively
Insurance
We’ve used all four methods in combination to manage and protect our assets, especially since our long-term vision included investing in both real estate and other business ventures.
It’s worth noting that in response to your question, you received a range of opinions, some of which contradict each other, and others considered someone's advice to be bad. My suggestion: create a 10-year roadmap for your business. Assume success. Then present that plan to experts or experienced business people who have already accomplished what you're aiming to do. Learn how they’ve structured and protected their business and use those insights to decide what’s best for your long-term business plans.
-
- 1yStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@Crystal Smith Assuming you do not own real estate in any of these states, can you provide real life examples of your WY, NV or DE entities helping you? The instance where the charging order protections became applicable? The WY or NV case law applying? Ever been in a business dispute where DE was the proper venue and choice of law and the DE Court of Chancery heard the case? Or was it the DE or NV Series LLC accessibility? Many states do not recognize the benefits and many lenders are reluctant to lend to a borrower using a series LLC.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes1y
Quote from @Stuart Udis:
@Crystal Smith Assuming you do not own real estate in any of these states, can you provide real life examples of your WY, NV or DE entities helping you? The instance where the charging order protections became applicable? The WY or NV case law applying? Ever been in a business dispute where DE was the proper venue and choice of law and the DE Court of Chancery heard the case? Or was it the DE or NV Series LLC accessibility? Many states do not recognize the benefits and many lenders are reluctant to lend to a borrower using a series LLC.
mmm, let's see. Should I engage in a discussion with an attorney on a public forum about my business and any potential disputes, or should I trust the attorneys and business advisors who work for me? I think I'll do the latter.
- 1yStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@Jake Yuskaitis Can you articulate the circumstances or fact pattern where the charging order protections will become relevant? How about the supposed benefits of the anonymity? Assuming there is a mortgage on the property can't the publicly recorded mortgage be viewed? Can't you scroll to the signature page of the mortgage?
@Crystal Smith You should be able to explain how these entities protected you without sharing any details about your business, properties you own etc. Here's an example:
A few years ago a bank draw inspector tripped over some lumber while inspecting the framing of a new construction project I was working on. I learned through the bank that 3rd party inspector injured his ankle. I heard nothing more about this for 9+ months. The inspector continued to inspect for bank draws and immediately after the final draw I received a letter from a plaintiffs' attorney alleging his injuries. Now it was a lousy case because he waited so long and continued to collect his $275 draw inspection fees. However, I turned over to my carrier the letter along with the contract between my entity and the general contractor, and the insurance certificates and endorsements from the general contractor and the framing contractor who each added my entity as additional insured. My insurance was not utilized, I believe I may have spent 20 minutes reviewing some interrogatories. You know very little about my business, or the property and I just shared with you how I navigated a conflict. See, its easy.
The problem is so many have these unnecessary entities and cannot articulate why they have them or how they benefit from them.
- 1yJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votesyes. you can look at the signature page. but that's why the structure is done with redundant layers. also what if you buy free and clear? or the mortgage is eventually paid off? there is no doubt the previously mentioned structure will provide anonymity, which is objectively advantageous. you don't want people knowing what you own.
Quote from @Stuart Udis:
@Jake Yuskaitis Can you articulate the circumstances or fact pattern where the charging order protections will become relevant? How about the supposed benefits of the anonymity? Assuming there is a mortgage on the property can't the publicly recorded mortgage be viewed? Can't you scroll to the signature page of the mortgage?
@Crystal Smith You should be able to explain how these entities protected you without sharing any details about your business, properties you own etc. Here's an example:
A few years ago a bank draw inspector tripped over some lumber while inspecting the framing of a new construction project I was working on. I learned through the bank that 3rd party inspector injured his ankle. I heard nothing more about this for 9+ months. The inspector continued to inspect for bank draws and immediately after the final draw I received a letter from a plaintiffs' attorney alleging his injuries. Now it was a lousy case because he waited so long and continued to collect his $275 draw inspection fees. However, I turned over to my carrier the letter along with the contract between my entity and the general contractor, and the insurance certificates and endorsements from the general contractor and the framing contractor who each added my entity as additional insured. My insurance was not utilized, I believe I may have spent 20 minutes reviewing some interrogatories. You know very little about my business, or the property and I just shared with you how I navigated a conflict. See, its easy.
The problem is so many have these unnecessary entities and cannot articulate why they have them or how they benefit from them.
the charging order protections would protect the llc from being forced to take distributions.
do you not see the benefit? cost of a wyoming llc is so nominal.Frontier Funding LLC533 Reviews
- 1yStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
Layer all the LLC's you want, you're still personally guaranteeing that loan and your name appears on that signature line. All you are doing is making the potential lenders job more difficult trying to understand the entity structure, beneficial ownership etc. Don't you want a simple loan application and make the underwriting process easy for the lender?
Pay off the mortgage and that mortgage is still recorded. One extra scroll with the mouse pad and there's the mortgage, still public and available to view. How many investors buy real estate without ever using debt? Most municipalities have licensing and permitting that's required to operate investment real estate, whether it be income producing or for-sale and it's not difficult to obtain the documentation bearing the owner's name. As an investor you are giving immense authority to 3rd parties if you do not want any documentation to bear your name or signature. Is this realistic for the small mom and pop landlord or investor?
Someone hurts themselves at one of your properties, do you believe not knowing the identity of the member behind the LLC will deter the plaintiff's attorney from filing the claim? What happens when you are deposed or are sent interrogatories? If the tenant is living in inhabitable conditions, do you believe this will stop them from withholding rent? Retaining free legal assistance from the local legal aid office? I do not believe there is any deterrence whatsoever.
Charging orders- why go through the trouble when there is an entity that owns real estate and is linked to the conflict? In instances where no insurance is available, why not just seek a judgment against the entity? It's far easier than trying to pierce the entity. Now the title is clouded. Go to refinance or sell and that judgment must get cleared.
I am merely pointing out the lack of practicality when it comes to some of these strategies. Failure to understand procedurally how useless these strategies are leads to a lot of unnecessary costs and time spent chasing down these strategies where time and money is better spent elsewhere.
- 1yJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
i work in lending. i have done plenty of loans with layers of LLCs and it wasn't a problem at all.
you're also not always personally guaranteeing the loan. there are non-recourse loans.
feels like you're going out of your way to find ways where the benefits would be weakened or not apply.
of course no strategy is perfect or 100%. but are you denying there are any benefits?
anonymity can absolutely prevent certain legal action. and the charging order protection is last resort. it's another layer of protection. obviously a solid insurance plan is always a good idea.
Frontier Funding LLC533 Reviews - 1yStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
@Jake Yuskaitis "What if you buy free and clear"....."You're also not always personally guaranteeing the loan, there are non-recourse loans".... I would say you are going out of your way to find extremes to make your arguments. Even in the non recourse loan which is rare, the borrower still signs and there are always carve outs that vary but at minimum your standard bad boy acts will apply. No lender is giving a loan without the borrower signing.
You say the charging order is last resort but why would the plaintiff who has a valid claim against a property owner who owns real property that's titled to the name of the defendant want to even go there? I will help you out- if the collateral has no equity and the plaintiff has real assets worth the pursuit of a plaintiff's attorney. But first they have to pierce the corporate veil- do you know how difficult that is? This all goes back to practicality and these strategies offer no benefit and are completely impractical for 99.9% of real estate investors.
- 1yJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votesI'm not going out of my way to find extremes. Some structuring strategies and business decisions are designed specifically to cover extremes. That's the point.
Quote from @Stuart Udis:
@Jake Yuskaitis "What if you buy free and clear"....."You're also not always personally guaranteeing the loan, there are non-recourse loans".... I would say you are going out of your way to find extremes to make your arguments. Even in the non recourse loan which is rare, the borrower still signs and there are always carve outs that vary but at minimum your standard bad boy acts will apply. No lender is giving a loan without the borrower signing.
You say the charging order is last resort but why would the plaintiff who has a valid claim against a property owner who owns real property that's titled to the name of the defendant want to even go there? I will help you out- if the collateral has no equity and the plaintiff has real assets worth the pursuit of a plaintiff's attorney. But first they have to pierce the corporate veil- do you know how difficult that is? This all goes back to practicality and these strategies offer no benefit and are completely impractical for 99.9% of real estate investors.
I don't think your second paragraph makes sense. I never advocated people own in their own name.
I don't know how you can say these strategies offer no benefit. You've already listed the benefits.Frontier Funding LLC533 Reviews
- 1yTim BakerPro MemberFlipper/Rehabber · Cleveland, OH · Member since 2025 · 3 posts · 8 votes
Ohio allows you to set up a "series" LLC. This means you can have multiple sub LLC's under one main one. You can research this in ChatGPT and then consult with an attorney if you are still unsure. I just set up mine two weeks ago and it was a fairly simple process. The state form is straightforward and has a step by step explanation for what each line is requiring. Also, don't forget to apply for your EIN number after filling out the state paperwork. Good luck. Feel free to reach out if you have any questions.
- Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes1y
@Jake Yuskaitis You said
"Some structuring strategies and business decisions are designed specifically to cover extremes."That would be my point. The situations that complex structures would help, are pretty rare and extreme.
I don't know the cost to have a Wyoming LLC and it might be cheap if you do it yourself. But I am pretty confident the guru attorneys that promote Wyoming LLCs are charging a lot for their advice. My guess is that to benefit from a Wyoming LLC you would need some pretty good (IE expensive) legal advice to advise you how to set up and maintain.
I absolutely believe there is a benefit to Wyoming LLCs, however the benefits are grossly overstated and cost greatly understated. As someone who has a complex business structure I can personally attest to the fact it has cost me hundreds of thousands of dollars to maintain and in lost opportunities due to inefficiencies.
If you feel it is right for you fine. If you think it is right for the average reader here I strongly disagree and so do top attorneys I work with.
- 1yDrago StanimirovicBusiness MemberNew to Real Estate · Miami, FL · Member since 2024 · 1k+ posts · 433 votes
Brad, the most straightforward structure for what you're looking to do is the Series LLC or a Holding Company with individual property LLCs beneath it. You create a parent LLC that owns separate child LLCs, each holding title to one property. This isolates liability per property while allowing you to build business credit under the parent LLC. Start by setting up your parent LLC, open a bank account under it, establish an EIN, and begin building credit lines.
- 1yKerlous TadresBusiness MemberRealtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes
Hey Brad, setting up an LLC for each one is a solid way to protect yourself. I'd recommend getting your LLCs filed with the state and grabbing an EIN for each. To build business credit, start with smaller vendor accounts that report to business bureaus, and over time, you can work your way up to larger credit lines without needing personal guarantees. Just keep in mind that managing multiple LLCs can be a bit expensive, so some investors combine properties in one LLC to keep things simpler.
Kerlous Tadres | Reafco Real Estate539 Reviews - 11moCorby GoadeBusiness MemberInvestor · Boise, ID · Member since 2014 · 3k+ posts · 3k+ votes
This idea of creating a legal structure and all of these LLCs is just a way to justify inaction for new investors IMHO.
I'm not saying asset protection doesn't matter, it certainly does, but how much does it matter when you have zero assets to protect? Not much.
Start taking action, underwrite deals, make offers, buy properties and build the ship as you sail. You can develop relationships with attorneys and cpas as you build capital and a portfolio and get guidance along the way.
Side note- if you are truly concerned about asset protection, for the love of all that is holy, hire a property manager who knows what they are doing. The absolute best way you can protect your assets and sanity is by not inviting all kinds of liability by self managing and making costly mistakes with tenants, leases and fair housing.
Just start doing stuff- best of luck!
- Lender · CA · Member since 2018 · 635 posts · 393 votes11moI generally share this sentiment. I would caveat one other cheap effective asset protection piece: get a good umbrella insurance policy. Very cheap, and covers people in all areas of life not just their rentals from personal liability protection. But to your point, most people have absolutely no need for this until much further down the line in the investment journey.
Quote from @Corby Goade:
This idea of creating a legal structure and all of these LLCs is just a way to justify inaction for new investors IMHO.
I'm not saying asset protection doesn't matter, it certainly does, but how much does it matter when you have zero assets to protect? Not much.
Start taking action, underwrite deals, make offers, buy properties and build the ship as you sail. You can develop relationships with attorneys and cpas as you build capital and a portfolio and get guidance along the way.
Side note- if you are truly concerned about asset protection, for the love of all that is holy, hire a property manager who knows what they are doing. The absolute best way you can protect your assets and sanity is by not inviting all kinds of liability by self managing and making costly mistakes with tenants, leases and fair housing.
Just start doing stuff- best of luck!
Join the conversationCreate a free account to reply, vote on answers and follow this thread.