Operating under an LLC or Not?

[Ben Capone]

BP team,

My partner and I got our first rental property occupied about 3 months ago here in San Diego. We are currently doing a live in flip on another and plan to rent that out in about 4-6 months. We are co owners on both (50/50 split).

The plan is to open an LLC as we continue to grow. Question is - How critical and when does it make the most sense to do so? We have talked to a few people who are dumbfounded we don't already have one and few people who say holding off makes sense for our situation.

With the fees to open and operate an LLC in CA we would likely wipe out our cash flow right now from the first property. I am looking into covering us on the Insurance end with a landlord policy. Does that equate? Will we be safe enough in the event something were to happen? Also, if we were to look at opening in a different state where it is cheaper/less fees what would that need to look like on our end?

Interested to hear any and all experiences and pros and cons to operating under a CA or out of state LLC. Appreciate all the info in advance.

[Cameron Moore]

Hi Ben, you do not actually need an LLC to have proper protection in the event of a liability issue. My recommendation, for the time being, is to get a General Liability policy in yours and your partners name to protect you for any liability issues or lawsuits.