LLC single member vs sole proprietor

[Blake Will]

I'm reading conflicting opinions on whether an LLC is worth the additional cost as opposed to having a good umbrella insurance policy. Is there a certain portfolio value threshold that makes an LLC much more valuable?Would it be different if I had a partner?

[Stuart Udis]

Insurance and LLC's provide different benefits. I tend to favor LLC's when purchasing investment real estate but more for business planning and the fact the LLC is more likely to keep your name out of the docket. At the same time utilizing appropriate insurance (and using it correctly) is necessary. It's not a one or the other proposition.

There are so many misconceptions when it comes to asset protection, specifically involving LLC's and insurance. Investors really should take the time to educate themselves. Just the question of LLC or Insurance points to this. There's an acceptance amongst most real estate investors that liability events will occur and so much focus is placed on preparing for that liability event whether it's the belief an LLC or Insurance will provide the necessary protection. I challenge more investors to ask the question: How can I operate my business in a way where I can deter liability events from occurring in the first place through sound operations. Ironically most who spend on LLC's and overkill Insurance are negligent in their operations, are susceptible to carriers excluding coverage, spend an unnecessary amount of time defending claims, experience insurance premium increases etc.

Not saying LLC's and Insurnace are bad, but start with being a good operator. You will save a lot of time and money in the long run and your properties will perform far better. This should be done by all investors irrespective of their strategy in addition LLC's, if deemed necessary and appropriate insurance which should always be carried.