LLC's in Different states or under 1 LLC?

Question

HI Everybody!

Im a  relative newbie and Ive finally come to the point where I must LLC. I currently have 2 houses in 2 different states under 1 Umbrella policy but the insurer will only let me do this till mid year. Now Ive just bought my 3rd and 4th in 2 diff cities. So 4 houses in 4 different cities- FL, GA, IND and STL.

Id love to hear any suggestions or advantadges or disadvantages of having them in separate LLC's in each state or under one?

Also any recommendations to any LLC policy companies.

Thanks in advace for any help!Johanna

Steve Vaughan · Answer

Johanna R. no, all my multi's in the LLC are in the same state.  I would still lean toward only one LLC if I was dealing with single-family homes in different states.  For me , it's protection based on value.  When my portfolio value within this LLC exceeds $2mil or so, I will diversify and place future assets into another.   Another reason, along the tax reporting line not to open entities all over the place.  Quarterly state B&O tax reporting. Every 3 months you may be dealing with this X4.   No thanks!

Account Closed · Answer

Having to comply with the timely filing requirements of multiple states could literally turn into an administrative nightmare. There is also the cost of maintaining all the LLCs on a yearly basis -- although it seems some of the states don't require yearly filing?

This being said, both the cost of maintaining the LLC and/or the administrative issues may be well worth it, if a liability does result at some time of your owning the property and if the insurance isn't sufficient.

There is some value in placing each property in a distinct entity.

Marco Santarelli · Answer

This is a good question and a much discussed topic.

I just posted a new podcast episode last week on the very subject of "Asset Protection for Real Estate Investors".  These questions and more were covered in detail on that episode (#010).

Continued success!

Johanna R. · Answer

@Steve Vaughan Yes, that makes sense. I appreciate your help, thanks.

Johanna R. · Answer

@Alberto Artasanchez Thank you.

@Steve Vaughan Are your Multi-Fams in different states?

Steve Vaughan · Answer

I would think 1 LLC in your state would be fine.  Like @Alberto Artasanchez points out, you will have to file multiple tax returns for your multiple EINs and, as a bonus, multiple bank accounts. I wouldn't.  I have 3 multi-families in one LLC and feel adequately protected.  As far as insurance goes, the co's insure the assets.  I would think one national landlord home insurer could insure all of your properties if they are residential (4 units or under).  If commercial, you will probably have 4 separate co's with 4 differerent policies.

Alberto Artasanchez · Answer

Advantage: Having multiple LLC's create a layer of protection between the LLC's.

Disavantange: You will have to pay separate tax preparation and filing fees for each entity.

LLC's in Different states or under 1 LLC?

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