I have several rental properties that are in an LLC. It is my understanding that the purpose of the LLC is to protect the owner from liability issues and that in order to do that each property should be in it's own LLC.
This is both expensive and complex as it requires separate checking accounts and tax returns for each property. In addition there are insurance issues as these are considered business's and I have found that I need to carry a separate Liability policy on each property.
My thinking is that it might be simpler to remove the properties from the LLC and carry one large umbrella policy for liability. Any guidance on this would be greatly appreciated.
Interested to hear other people's thoughts because both sides have good arguments but I have yet to make a decision which way to go. Currently not using LLC but learning toward changing that soon.
Ron- you do not "need" to put each property in it's own LLC. I currently have 3 properties (37 doors) in 1 LLC. In theory, your total equity inside of any 1 LLC is exposed to a lawsuit that originates from inside of that LLC. It is simply up to each person's tolerance to risk to decide how much exposure is too much, and therefore the need for subsequent properties to be placed into a new LLC. As for myself, the very next property I purchase will be in a new LLC. Hope that helps.
I have two properties in Self directed IRA's. I also have two duplexes, one townhouse and three single family homes. Of those not in the self directed IRA's , three are in an LLC. Since I use only one checking account for all of them (not IRA's) I think the LLC could easily be considered not valid. The question is, do I remove those in the LLC and close the LLC or do I put the others into the LLC? The purpose of the LLC is protection of personal assets, but I don't think it really would as it is currently being used. On the other hand if I remove the LLC then everything I own is potentially exposed. My properties are well maintained and I attend to any problems very quickly, but you never know!
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