Updated almost 10 years ago on . Most recent reply
To LLC or not to LLC?
Hello,
I am looking for opinions and use cases for establishing an LLC or multiple LLCs. When did you create your first LLC and what was the rational behind it? What are the pros and cons?
If you have multiple, at what point did you decide to establish numerous companies? From an administrative standpoint, do you have separate bank accounts for each LLC? Do you have separate credit cards? What is your process for tracking and keeping everything organized.
Most Popular Reply
Welcome to BP Dana!
My personal preference is to segregate each property to a separate LLC. This also means that each LLC has its own bank account, bookeeping, tax filings, etc. The individual LLCs are then owned by my holding company which is a separate LLC.
My reason for taking this approach is for risk management. If something happens in one of my properties and I end up getting sued then the claimant is limited to going after the assets of that individual LLC and nothing else. Of course many would argue that really good insurance would take care of this but in this day in age it's not worth taking the chance. The added cost is also really not that much.
The other reason is that I also do Joint Ventures (JV) for some of my acquisitions. In a JV my holding company is investing right alongside another investor or group of investors and in that scenario you have no choice to but acquire the property under a separate LLC that's going to hold the title for the property. We all become members of that LLC and my holding company is designated as the sole manager in charge of the day to day decision making and operations of the property.
Invest in a good attorney and CPA, they will be able to guide you in the right direction depending on your investing strategy. A few dollars well spent now will save you thousands down the line.
Good Luck!