Hello. We have 10+ properties in Kansas that I want to move out of our individual names into the proper entity. I've heard various things about each property being in its own LLC, dividing them half and half, etc. Which is the safest structure while also being simple and easy to manage? I know different states have different options, would love advice. Also any attorneys or tax folks that can help create them, or could I Just do it online?
The process of entity structuring is somewhat depended on your risk tolerance. There are investors who dont have LLC for 30+ units because they are ok with that. (Not saying this Ok)
It is a matter of your risk tolerance and what gives you peace of mind.
Normally, you would wanna separate your properties based on risks ( kind of tenants or area), value ( not more than 500k in one LLC), location, and other preferred methods.
Also, depends on how much equity you have in the house or is it really required if you have a non-recourse loan with low equity?
Also, you would have to follow some rules to get the desired asset protection from LLCs ( separate books and those kinds of stuff). I have seen people getting 10 LLCs but not following rules. that would be waste of time and money.
If your state, has provision for Series LLCs, maybe that is a better option than having multiple LLCs.
Great advice Ashish.
Expanding upon Ashish's desired asset protection comment, this is very important. If you want the protection from the LLC, make sure you are operating under it. For example, if you establish a rental property as an LLC, you'll want to set up a separate bank account for that LLC and consider having a debit/credit card linked to that account. When tenants pay you, ensure that they pay the LLC (the check is written out to the LLC, not yourself). All expenses should be charged the LLC's debit/credit card. As state above, you'll want to keep the books separate and so forth. If you set up an LLC, but you are not operating under the LLC, you can lose the desired protection the LLC offers.
Please note, I'm a CPA and not an attorney. So this is not legal or financial advice; it is simply based on my experience and background. Let me know if you have other questions!
You already got advice from two accountants, and I'm the third. Whatever the three of us say is pretty much irrelevant, since we are not attorneys, and this is a legal issue. You mentioned having heard "various things" - which is exactly how it goes. Everyone has an opinion about legal protection, just like about dieting or economy.
Here is the bad news. Lawyers notoriously disagree about asset protection, too. Ask them - they will confirm. If you talk to Attorney A, he may say do this. You go to Attorney B for a second opinion - and she says the exact opposite of the first one. You go to Attorney C to figure out which one was right, and he gives you a third opinion, contradicting both A and B. Not trying to be funny, it is the reality.
Hence my advice.
1. Ignore opinions of everyone except attorneys, and specifically Kansas attorneys.
2. Make sure that the attorney you talk to is familiar with Kansas Series LLCs. It does not matter whether she is for or against them, but she needs to know enough about them to have an informed opinion.
3. Do not attempt to seek a second/third opinion. Find one attorney you like ans trust and just follow his advice.
4. Remember, as already mentioned, that whatever structure you create, it requires work and discipline in operating it.