Forming a LLC

3 Replies

My business partner and I have an LLC. In the LLC we have a total of 8 properties. I have read where you shouldn't have too many properties in one LLC. I understand the reasoning is that if we are sued you only want the one asset to be in jeopardy. Does that mean we should have each property in its own LLC? I was in a meeting with my accountant today and she suggested we could start several LLC's with them reporting to our parent LLC? The way she explained it, the Parent LLC is owned by my partner and myself. Then the Parent LLC will own all the other LLC's we form. This way we could have one or a couple of properties in different LLCs to be protected liability wise, but NOT have to have a checking account for each LLC. Does anyone agree or disagree with that? Also she did advise me to run this strategy by my attorney. Any suggestions or help would be greatly appreciated. Thanks.

@Charles Williams  I am not an accountant or attorney. A few things come to mind, do you have mortgages? Whats your risk tolerence? How in depth do you want to go? I mean at one time I had 13 companies operating it was alot to keep up and legal, most people would co-mingle stuff and then you defeated your purpose.  I like the idea of the parent company, but I would set it up with a Management company so no one ever see the main company anywhere (ie checks to vendors and what not), If they dont know it exist its harder to sue. Just saying and no legal advice or accounting. 

@Charles Williams the main question is do you any debt on these properties? If the answer is no you just need to form another llc and place a mortgage DOT on the property for slightly higher than what it is worth. Ie you get sued they look into your asserts of the company there is no equity to take. I would use an llc like 1st American mortgage etc etc have you attorney actually be your registered agent.

Second if you do have debt on the homes, having multi able llc 's does not stop someone from filing claims against all of your llc's does not mean they will win but as stated above they can "perce the corporate vail" come after you personally or all entities if they are not run exactly by the operating agreement.  With that said at one point I had a lot of llc's s-corps etc.  basically you need a holding company and an operating company. Properties deeded to the holding company and operating handles day to day affairs.

If Virgina has series LLC go that route. If VA does not have series LLC form one in state that does like TX,NV,DE and register it in VA as a foreign Corp.

Or put each property into a Land Trust and have the LLC hold the beneficial interest.

Then have each trust have a management agreement with one of your LLC to do property management.

The way you have it now you are waving a red flag for anyone to know what assets you own. Have a discontented renter go to a lawyer over an issue, the first think the lawyer will do is an assset search to see whether or not it is worth his while to sue.

LLC only gives some protection. Once your assets are discovered you can be sued personally whether you are liable or not.

Trust agreements are not recorded.

I have a friend that was sued via his LLC and personally over an accident on one of his properties. One of his tennants was shot by a jealous tennant. Cost him $268,000 in legal bills. Had to sell half his assets to pay the bill.

I am sure others will have suggestions.

Create Lasting Wealth Through Real Estate

Join the millions of people achieving financial freedom through the power of real estate investing

Start here