LLC or not to LLC. That is the question.

2 Replies

I currently have an LLC that I have for a commercial property that I own and lease. I am going to close on a fix and flip soon. Should I put the fix and flip in a separate LLC and should each subsequent fix and flip that I purchase be put in it's own LLC?

 @Jeff Bairstow

Hey Jeff.  This is a very hard question to answer generally.  This should be asked to you attorney and your CPA.

I personally have used an LLC for a commercial property because that is the only way I could get financing. I have also done a fix and flip under my personal name. I did however get very very good insurance on the property and purchased an umbrella policy above the original policy. It is all about your comfort level. Ask yourself some questions like, do you have more to lose the the average person? Do you have a high net worth that you need to protect? Will the LLC in your state save you on taxes? If I start a new LLC for every investment will I ever cashflow? Your CPA and attorney should be able to help you with the answers.

Originally posted by @Jeff Bairstow :

I currently have an LLC that I have for a commercial property that I own and lease. I am going to close on a fix and flip soon. Should I put the fix and flip in a separate LLC and should each subsequent fix and flip that I purchase be put in it's own LLC?

 Hey Jeff,

There can always be factors that would impact the advice I would give, but the general rule would be to try and hold your assets in separate entities as much as possible - especially when they are different asset classes (fix and flip holds different liabilities than commercial.) Some investors are willing to place multiple entities in a single LLC, increasing the exposure and potential loss, in order to leverage their money to grow faster. While it is a small (increasing with each investment) risk they face to get sued, any lawsuit against the LLC exposes all of those investments - a bad judgment could lose all of your investments. If the investor has all those properties in separate LLCs, they would only be risking losing a single property in a law suit.

Another option for investors who plan on continuing to scale their investing portfolio would be to implement a Series LLC. It's an entity that you would only need to form and apply for once, and from that point each addition "child series" would be created via private documents that you could type up from your computer at home. 

In the end it comes down to how many investments you have, your personal assets and your future investing goals.