Has anyone started a separate management company for added protection?

Question

I read an article written by an attorney that suggested starting a separate management company to provide another layer of protection in the event of a lawsuit.  Has anyone done this?  Is it worth the trouble?

Here's the article.  Scroll down to "The Recommended Two Company Structure".  The rest of the article is worth a read.  There are many more good articles on this site as well.  This is in TX btw.

http://www.lonestarlandlaw.com/Asset-Protect.html

I'm making preparations to get kicked off doing mobile homes.  It looks like I'm going to start with one LLC.  I'm still researching the Series LLC but haven't made a decision on it yet.  That's for another thread.

Thanks for the input.  It looks like I'm going to have to place a call to an attorney soon.

Carl G. · Answer

Thanks for the input guys.  Seems that there's not a whole lot I can do since I'm a one man show.  I did have a NV LLC suggested to me today due to anonymity of ownership.  I'll read more on that later.

Obviously protecting personal assets is important.  I'm also concerned with protecting my business assets.  I guess I have concerns about those assets being subject to a lawsuit if one ever arises.  As Sam Parkins said, the attorney will be the best one to answer those questions.

Jeff  S. thanks for asking the question.  That's seems like it is correct.

Shane Keilers are you saying that you carry a personal umbrella policy to protect your personal assets?  Thanks for the info.

Shane Keilers · Answer

Carl G. I met with a couple of asset protection attorneys and their feeling was that it would not help.  I have my houses divided into 3 LLC's with 10 houses max in each LLC.  It was not practical to have more LLC's due to paperwork, accounting, etc...  On top of that, I have a commercial liability policy and an umbrella on my personal side.  My council felt that my personal hobbies (boating, skiing, hunting, off-roading, etc...) were more likely to expose me (e.g someone gets hurt on my boat/dirtbike/ranch, etc...) than my rental investments, so it is important to protect your interests in an LLC from any personal judgments you could encounter also.  Until/unless you have a lot of equity, I would not worry about it.  Also, it was their opinion that a multiple member (even a married couple) was stronger than a single-member.  The Series LLC was a non-starter as you have to keep separate bank accounts and accounting, which is just as painful as if they were individual LLC's.  The more LLC's and accounting/bank accounts you have, the more likely you will make a mistake (accounting / co-mingling / etc...) which allows it to be pierced.   Usual disclaimers - I'm not a lawyer, this is not legal advice, YMMV, etc...

Jeff S. · Answer

Carl G. was at a seminar with a well known RE attorney when this question was posed. He said that basically if you are a single member LLC and you are managing the property yourself you will have a hard time proving you aren't personally managing the property even with the LLC as manager.

Sam Parkins · Answer

Carl G.

In Virginia, it's only about $100 to get an LLC if you do the work yourself, and it's not hard.

Therefore, to directly answer your question, YES, I have a property management company as well as the "investing" company for the homes. I have gotten multiple LLC's for the layers of protection and the risk management that if one goes down I don't lose all assets in the others.

However, an attorney recently told me that the multiple LLC "armor" can be pierced. Something to do with that fact that if I am proven to knowingly mislead and "convicted", it doesn't matter if I have a million LLC's, I personally am liable and therefore (since the LLC is a pass-through to me) all my LLC's are at risk.

There should be plenty of other folks that chime in on this that can add a whole lot more. I'm not an attorney or anything close, only regurgitating what I've been told.

There are courses, teachers, and plenty of the mess out there dealing with this stuff. In fact, the local community college around here is running an asset management class now. It's a big deal, and certainly best left for the professionals, i.e. attorneys.

You're acknowledgement in contacting your attorney is certainly the best bet!

Hope that helps.

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