Investor · Marietta, GA · Member since 2016 · 54 posts · 10 votes
Hi all,
I'm preparing to file Articles of Incorporation for an
LLC in GA for my rental properties. I plan on putting the properties
under the LLC via quit claim (I've talked to my lenders, who have OKed this).
I also plan on doing other investments (equity/debt securities and
currency investments) with the LLC's money, so there is that
consideration. Are there any specific articles that I should consider
putting in the LLC's Articles of Incorporation if I am going to be the
only person in the LLC? I assume it's more complicated if multiple
people are in it, but does anyone have any suggestions for single-person
LLCs? Or should I just incorporate stating that the LLC is meant for
the management of real estate and supplemental investment activities?
These generalizations about LLCs are not accurate in all jurisdictions. Statutes and case law regarding LLCs are state-specific, and what is true for you in California or Florida could be completely wrong for the original poster in Georgia - he should talk to an attorney in his state.
In both of the jurisdictions in which I am licensed (Texas and Oklahoma), state law says the exclusive remedy for an LLC member's judgment creditor is a charging order. The statutes do not limit this protection to multi-member LLCs. I cannot find a case in either Oklahoma or Texas where the court has pierced an LLC because the LLC had only one member (if anyone knows of one, please post or send it to me).
An LLC does need its own separate funds, and it needs to keep company records in compliance with its operating agreement and state law. But in my two states, an LLC is not required to hold annual meetings, or even have a board. So that would be a very odd reason for a court to pierce the structure.
The LLC is not right for every situation, and a multi-member LLC is preferable to a single-member LLC for asset protection. But the single-member LLC can be a useful tool in some jurisdictions, and should not be dismissed without understanding the applicable state law.
one member LLC is not safe in litigation it will considered same as ownership
This is not true from my understanding if the conduct your business in a manner that doesn't mix business and personal and the litigation does not arise from something from your personal negligence while working on behalf of the LLC. You receive the same protections as a multi-member LLC.
Massapequa Park, NY · Member since 2017 · 62 posts · 48 votes
9y
@Jonathan Roveto I suggest googling Clint coo s of Anderson advisors. He's an attorney that has published articles on setting up an llc. I remember him advising setting up a manager llc. But when in doubt. Consult an attorney. I'll be closing on my properties in a couple of weeks so I need to see if mine will allow. If not I'm going to increase my umbrella policy.
one member LLC is not safe in litigation it will considered same as ownership
This is not true from my understanding if the conduct your business in a manner that doesn't mix business and personal and the litigation does not arise from something from your personal negligence while working on behalf of the LLC. You receive the same protections as a multi-member LLC.
The single member LLC is viewed as a 'shell' and thus most likely to be not run in a business like manner and get easily pierced. When's the last time you called a Board Meeting, sent out the Notice and/or Waiver, recorded the notes and remembered to file your annual list of members? @Surender Singh is right IMO
Investor · Marietta, GA · Member since 2016 · 54 posts · 10 votes
9y
@Jeff B. I'm not terribly convinced based on those notes. Are there any cases where an SM LLC had its owner held personally liable based on corporate formalities not being followed (i.e., a judge actually saying that an owner was not separate from his business because he didn't take meeting notes for himself)? I would be more convinced if I saw that. Things like committing fraud or being improperly capitalized make total sense (the former being the obvious result of commingling assets), but if you are properly capitalized, have a separate bank for your real estate business, etc. and the actions that cause litigation aren't from personal gross negligence, why would a judge allow your personal property to be up for grabs?
For that matter, if what you say is true, why do SM LLCs exist in the first place? I'm not being facetious because if what your saying is true, I don't actually understand why anyone would form an LLC if it were just them or even a small number of people.
Other than to avoid SE tax if you do work that gets hit with that tax ;).
These generalizations about LLCs are not accurate in all jurisdictions. Statutes and case law regarding LLCs are state-specific, and what is true for you in California or Florida could be completely wrong for the original poster in Georgia - he should talk to an attorney in his state.
In both of the jurisdictions in which I am licensed (Texas and Oklahoma), state law says the exclusive remedy for an LLC member's judgment creditor is a charging order. The statutes do not limit this protection to multi-member LLCs. I cannot find a case in either Oklahoma or Texas where the court has pierced an LLC because the LLC had only one member (if anyone knows of one, please post or send it to me).
An LLC does need its own separate funds, and it needs to keep company records in compliance with its operating agreement and state law. But in my two states, an LLC is not required to hold annual meetings, or even have a board. So that would be a very odd reason for a court to pierce the structure.
The LLC is not right for every situation, and a multi-member LLC is preferable to a single-member LLC for asset protection. But the single-member LLC can be a useful tool in some jurisdictions, and should not be dismissed without understanding the applicable state law.
one member LLC is not safe in litigation it will considered same as ownership
This is not true from my understanding if the conduct your business in a manner that doesn't mix business and personal and the litigation does not arise from something from your personal negligence while working on behalf of the LLC. You receive the same protections as a multi-member LLC.
Jacksonville, FL · Member since 2015 · 183 posts · 22 votes
9y
You want to be aware of what the laws in Georgia say about single member LLCs and be aware of any difference in any protection given compared to a multi member LLC. That will also dictate what to include in the articles. Although a single member LLC can (if you know what you are doing) credibly withstand an attempt to get at the LLCs assets due to personal liabilities, Florida LLC law, especially when it concerns single member LLCs, is beyond hostile towards the single member LLC. Florida actually amended its LLC law in 2014 to ensure there are multiple ways to get at the LLCs assets for instance and in ways not common to Georgia.