What is right depends on your risk tolerance and amount of entities you are willing to handle. The more entities the more paperwork.
1. You want protection: LLCs offer that.
2. You want tax benefits: LLC offer that.
3. What is the purpose of a trust? High CA tax? anything else? Why type of trust?
4. What tax benefits are you looking for?
5. What is your exit strategy?
6. Single Family homes or Multifamily?
7. Are you the only investor?
8. How many properties total you plan on acquiring?
9. Is this your only business? Do you have a job too?
There are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice. Will depend on several factors like the type of property, type of tenants, your risk tolerance, other assets you own, your estate planning, laws where the property is located, etc.
Any lawsuits would be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced). But, an LLC will not limit you from liability in total. You can still lose your investment in the LLC. If you're going the umbrella insurance route, make sure it will cover you for several things including just the routine slip and fall (like mold or earthquake). You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.
Creating an LLC in California would cost you a minimum tax of $800 every year. You would have ongoing filing requirements with the State and would need to keep business records and documentation. Even if you create an LLC in the state where the property is located, California will collect $800 as a "foreign" LLC because you are managing the LLC from CA and therefore "doing business" in CA.
You also want to look at whether a pass-through entity helps your bottom line and your taxes. There is a new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies.
Also, when you say trust, do you mean a living trust/family trust, or do you mean a more specialized trust? Having an estate plan is very important, and in CA having a trust is almost essential to avoid probate but your typical family trust does not provide liability protection.
These are all things you will want to discuss with your attorney and CPA. If you need references for either of them in San Diego, let me know.
*This post does not create an attorney-client or CPA-Client relationship.The information contained in this post is not to be relied upon.Readers should seek professional advice.
I'll shoot you a PM. Sounds like you're describing a series LLC, which CA doesn't recognize.
Why complicate things so much with a trust? Start simple. Less cost, less hassle, less stress.
I would start with an LLC for one property. If you start to grow a lot then consider other options.
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