Is my Entity Structure overkill ?

Investor · Austin, TX · Member since 2016 · 7 posts · 4 votes

I need some guidance since i have got diff opinions from diff CPAs on my situation.

I have three LTRs (in TX) owned by a TX Series LLC. The TX LLC is owned by a WY LLC (as per advice/plan I had received from Anderson Business Advisors).

I have one STR in TX and one LTR in NC that are personally owned.

I have a C-Corp (no assets) as the Prop Manager to manage leasing and rental collection for all 4 LTRs. This was created as part of same plan from ABA. As I understood that allowed me to have an extra layer of liability protection. No Employees in the c-corp, just officers.

What should be the simplest entity structure? Do I need to re-structure? I do intend to acquire more LTRs in TX over next 2-3 years.

1 Reply

175 views

Most Popular Reply

Chris SeveneyBusiness Member

Moderator

Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes

Quote from @Anthony Dupre:

@Chris Seveney

Would you mind sharing a high-level overview of the structure your billionaire friends have set up? This would help us benchmark and explore simpler alternatives while understanding how complex the structure mentioned above truly is.

I assume they are not actively managing their business? How do they maintain their anonymity?

Thanks so much, and wishing you a Happy Thanksgiving!

Yes they actively manage their business (they have an employee). They are a LLC because its commercial properties. For example 123 main st is a $300M office building that is one LLC. They have 5 multifamily buildings that are 1200 units under another LLC.

They do not have any anonymity - why? there is no such thing and people think they are a lot more important than they really are. Unless you are super famous on TV and a celebrity you do not need anything. Best way to avoid anonimity is not post yourself all over the TV or youtube etc.

Let me ask you this question, could you pick any of the following walking down the street:

Andrew Florance, Carrie Wheeler, Bruce Flatt, Robert Reffkin, David Nunes...

Put it this way, if you cannot afford a full-time attorney on your payroll, you do not need to have a complex legal structure.

7e investments53 Reviews

Website View Page

5 Reply

See this reply in the discussion

28 Replies

Jump to latestLatest

Sort by

Jerry W.Pro Member
Moderator
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
1y
@Satyajeet Dodia, I agree if possible you should have your properties owned by an LLC. I do NOT think having an operating LLC located in a different state than the ones owned is overkill. For most people getting an LLC is relatively cheap. Less than $500. The important part is operating it properly. A lot of folks don't take the time to educate themselves on how to do that. There are benefits to having a second LLC over the first. I have never gone that far myself. The cost of renewing an LLC or changing the title is absurdly cheap unless you have one of those law firms that advertise a lot and have a huge advertising department and claim to have a secret sauce that guarantees protection. It costs less than $200 to file an LLC in WY. It costs around than $100 to change title on a property in WY, less if you do it yourself. I don't think I have a single insurance policy less than$800 that I can think of. The annual cost of doing my LLC in WY is usually $200, less than my checking account fees. I still never put less than $500K liability insurance on any house, and more on apartments.
Lawsuits do happen. Not a lot, but they are much more likely to happen than getting hit by lightning. An LLC is just one more shield of many you should have. The main one is running your business well.
In my experience better than 80% of lawsuits are settled out of court. The main reason is people get massively stressed and fear a multi-million dollar settlement and so agree to settle for a few hundred Thousand dollars. I have seen it multiple times. One was the steps were a few inches off of code in height, and the railing broke when the guy fell. The guy was over 300 pounds and had been drinking. The lawsuit was for over 2 million. The settl4ement was private, but I bet it was at least $400k knowing the attorney's involved, maybe more. Just make sure the cost of your protection doesn't rob your profit. Make it reasonable.
Hopefully this helps.
1 Reply
Ashish AcharyaBusiness Member
CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
1y
@Satyajeet Dodia Your current structure may be more complex than necessary. Consolidate your Texas Series LLC to own and manage your Texas LTRs and STR, eliminating the need for the Wyoming LLC and C-Corp unless specific anonymity or tax advantages justify their costs. Transfer your NC LTR into a separate LLC or the Series LLC if permissible. This streamlines operations, reduces administrative burdens, and retains liability protection. Simplifying to a single operational entity (Series LLC) for rentals and management can effectively meet your goals while minimizing costs. No C- Corp needed at your level. Be careful will with AAs.

This post does not create a CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
[email protected]941-914-7779
INVESTOR FRIENDLY CPA®4.9242 Reviews
Website View Page
TaxMD® | Tax Planning Software
Website View Page
0 Reply
Satyajeet Dodia
OP
Investor · Austin, TX · Member since 2016 · 7 posts · 4 votes
1y
Thanks to all of you for your valuable input.
I have decided to simplify my structure. I am going to dissolve the WY LLC.

Since the WY LLC owned the TX LLC, how do I 're-assign' the "TX LLC interest" to be owned by myself (and spouse) in my personal name? The WY LLC was named as managing member of the TX LLC .

Also should I consider having only myself as the manager (and not add my spouse) - otherwise it becomes a partnership and I would have separate cost to file a partnership return? My preference is that we both own the TX LLC equally.
0 Reply

Join the conversationCreate a free account to reply, vote on answers and follow this thread.