Legal issue's with an LLC

3 Replies

Hello Board,
I have my first purchase in the UW process right now and I have a question in terms of my long term growth that I was hoping we could address. I am purchasing this property via an FHA loan. Needless to say it is in my name. When I go to purchase my next property I was going to purchase it under an LLC for obvious protection reasons. My question is if there was a lawsuit on my FHA property could they go after my LLC? I don't believe that it could be the other way around because that is what the LLC is for but I was just hoping for some thoughts on this. Thank you as always forum :D

If someone sues you, they can try to get assets from an LLC where you are a member. However, they cannot reach into the LLC and take assets. They can get a "charging order" against the LLC, and take any distributions made by the LLC. William Bronchick explains how this works, and how to avoid letting someone take the LLCs assets or money in his book "Wealth Protection Secrets of a Millionaire Real Estate Investor."

In many states, single member LLCs do not provide this kind of protection.

If you are the only member of the LLC the court can and often does seize assets from the LLC to enforce a judgment.

The best way to protect yourself from personal liability is...

1) Don't screw people
2) Maintain liability insurance - an umbrella policy is very cheap.

YMMV of course.

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