Wyoming or Nevada LLC’s: Are they really “all that”?
Rental Property Investor · Phoenix, AZ · Member since 2018 · 2 posts · 0 votes
Wyoming or Nevada LLC’s: Are they really “all that”?
Most Popular Reply
Scott SmithPro Member
Attorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votesOriginally posted by @Account Closed:
I was told by a CPA and a Real Estate attorney not to put my properties into a Wyoming or Nevada LLC for privacy because if some attorney wants to find out who owns it or to know its members it's not hard to do so.
Any experience with this?
There are different benefits to different states, as can be seen in this article. On top of that, there are different strategies that can be implemented to offer the same, or even more, privacy. It is very important to understand the goals of asset protection and where it fits into the picture. I often break it down in four pillars: the first pillar is a good insurance policy as that cover the majority of your exposure. However, it only protects you from one type of liability: accidents.
After that you want to compartmentalize your assets, which is often accomplished through the use of LLCs or corporations. I personally find the Series LLC to be a great tool for the individual investor who is planning to expand their operation, as it allows for you to scale infinitely - check out this article to learn more. The third pillar is somewhat similar - you want to separate your operations from your assets. That means you establish a Traditional LLC to carry out the operations of your investments, in order to separate the liability from your assets, including: paying property management, paying contractors, collecting rent, marketing, etc. Finally, with the use of Trusts while establishing these structures you can add a level of anonymity by removing your name from public record - this offers you that privacy that you suggested above.
It's important to understand that as long as you benefit from a property that there will be some sort of liability that can be attached to you. The rich don't really own anything, they just control assets. It takes tremendous effort and money to connect their assets to their names. It's important to measure your personal exposure and the risk your portfolio faces, and invest in protection that matches it - that can range from person to person. The one thing that I have seen time and time again is that if you have the basics of asset protection put together it deters the majority of law suits - attorneys don't want to waste time in discovery and breaking through your defense when they can find another person who has properties in their own name or a poorly established LLC that can be easily pierced. Litigation is a business - if you increase their costs and hide you assets it goes a long way.
This is not legal advice, just some personal thoughts from my own investing experience on the situation you are presenting.
5 Replies
- Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes7y
Look for @Jerry W. if you have any LLC questions. He's a 10-pound brain on the subject.
It's true that your LLC does not keep you completely anonymous. Someone with an LLC bought the property next to mine. I searched the internet for the LLC name and found the mailing address. I searched for the mailing address and found a business. I searched the business and found the business owner.
They're not all that easy but there are ways.
The DIY Landlord Book4.7248 Reviews - Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes7y
Originally posted by @Account Closed:
I was told by a CPA and a Real Estate attorney not to put my properties into a Wyoming or Nevada LLC for privacy because if some attorney wants to find out who owns it or to know its members it's not hard to do so.
Any experience with this?
For what it's worth I'm not an attorney so take this with a grain of salt.
I spoke at an event in conjunction with an attorney in Washington and what he said was basically this...
Some states are a little more opaque with what information they make easy to find...
And some states do/don't have "charging orders". The way he explained it was basically in WA a judge can issue charging orders. What this means is if you have $100k net worth but your LLC has $1mil in rentals.
If YOU personally get sued for $800k a judge can force your LLC to distribute assets to you to cover it. They basically can piece that corporate veil.
Again- not an attorney...but that's something worth considering.
- 7yScott SmithPro MemberAttorney · Austin, TX · Member since 2014 · 1k+ posts · 932 votes
Originally posted by @Account Closed:
I was told by a CPA and a Real Estate attorney not to put my properties into a Wyoming or Nevada LLC for privacy because if some attorney wants to find out who owns it or to know its members it's not hard to do so.
Any experience with this?
There are different benefits to different states, as can be seen in this article. On top of that, there are different strategies that can be implemented to offer the same, or even more, privacy. It is very important to understand the goals of asset protection and where it fits into the picture. I often break it down in four pillars: the first pillar is a good insurance policy as that cover the majority of your exposure. However, it only protects you from one type of liability: accidents.
After that you want to compartmentalize your assets, which is often accomplished through the use of LLCs or corporations. I personally find the Series LLC to be a great tool for the individual investor who is planning to expand their operation, as it allows for you to scale infinitely - check out this article to learn more. The third pillar is somewhat similar - you want to separate your operations from your assets. That means you establish a Traditional LLC to carry out the operations of your investments, in order to separate the liability from your assets, including: paying property management, paying contractors, collecting rent, marketing, etc. Finally, with the use of Trusts while establishing these structures you can add a level of anonymity by removing your name from public record - this offers you that privacy that you suggested above.
It's important to understand that as long as you benefit from a property that there will be some sort of liability that can be attached to you. The rich don't really own anything, they just control assets. It takes tremendous effort and money to connect their assets to their names. It's important to measure your personal exposure and the risk your portfolio faces, and invest in protection that matches it - that can range from person to person. The one thing that I have seen time and time again is that if you have the basics of asset protection put together it deters the majority of law suits - attorneys don't want to waste time in discovery and breaking through your defense when they can find another person who has properties in their own name or a poorly established LLC that can be easily pierced. Litigation is a business - if you increase their costs and hide you assets it goes a long way.
This is not legal advice, just some personal thoughts from my own investing experience on the situation you are presenting.
- Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes7y
@Account Closed, I respectfully disagree to a lot of the above. First I believe having an LLc is a very good idea. It is the cheapest insurance you will ever buy unless you overpay horribly for it. It costs $102 and 15 minutes to form one in WY. If you operate it correctly it will provide massive protection. Next they don't protect from everything, nothing does that. in my opinion the only lawsuts anonymous filings protect you from are frivolous lawsuits with very little merit. if someone truly gets injured especially in a costly way, a lawsuit will be filed and discovery will rip through all your protections pretty dam fast. Example someone wants to sue for $200K because a piece of ice fell of the roof of one of your rentals and hit them, they might not go too far. Someone dies because you worked on the furnace and monoxide poisoning kills them, they will cut through the so called anonymity like a hot knife through butter. Still LLCs are very useful, and even a meaningless anonymous trust probably won't hurt you. If you self manage you will not escape potential liability by expecting anonymity to be a magic wand, but for the price of formation it is a LOT of protection. Now if you remotely manage using property managers and do not do it yourself you probably could keep anonymous.
Join the conversationCreate a free account to reply, vote on answers and follow this thread.