Is it stupid to have my name in my LLC?

36 Replies

My original idea was to have my Last name in the business name for the entity that would be managing my properties. The properties themselves would be in separate LLCs. My question is if this is a stupid idea. Others have told me in past forum posts that it would make it easier to "pierce the veil" in a lawsuit. From a quick read I just did I don't see how that's possible. My understanding is that that the whole purpose of an LLC is to keep things separate from myself in a financial sense. Could something so simple as having my last name on the LLC really allow someone to go after my personal assets? I am really confused on all this. Please help.

@Brandon Handel those people are absolutely wrong.  As i told you elsewhere, having your name in the LLCs name has nothing to do with "Piercing the Veil". However there are many things that could cause piercing the veil. 

A great example would be your LLC is named Brandon Handel LLC. You sign documents Brandon Handel. You just pierced the veil yourself. You need to sign Brandon Handel, Member, Brandon Handel LLC. (The word "member" could be any appropriate company title) That is an entirely different issue then your name in the LLC. That mistake could cause problems regardless of the name of your LLC.

I wouldn’t worry too much about piercing the viel. You’ll most likely do this yourself at one point. For me the main (read only thing) I care about with LLCs is anonymity.

They’ll look who owns their property. It’ll be an llc, registered to a local agent. They’ll maybe get the true owner from them with a court order. Then they’ll find the owner ya another llc registered out of state.

If they got that true owner they’d find me but I’d be living in another state.

Bottom line is unless I do something of gross misconduct (unlikely) or my tenant has money to burn on attorney (nearly impossible in current situation) it will never amount to anything.

Then plus all that I have insurance

@Ned Carey , I must've overread that part in your previous message to me. Your example makes a lot of sense to me now though, thank you. So that I know I understand you completely, having my name on it just makes signing papers more meticulous as I have to be careful not to sign as just myself but as a member of my LLC. Am I correct?

@Caleb Heimsoth , so you have your LLCs in another LLC that's out of state? I haven't really gotten that part of my strategy figured out yet, but my original thought was to have my LLCs registered in Nevada. From what I read their protection makes it nearly impossible for you to be wiped out. I can't remember the exact term they used but basically, it was my understanding that the most they can do is force the LLC to make payments which a lawyer won't want to even deal with because they want to get paid all at once. Am I correct on this? Should I have my properties in LLCs registered in IN and then have those LLCs all registered under another one in Nevada?

@Brandon Handel  check out think link:

The annual on going cost to maintain 1 Nevada llc is 500 dollars a year.  So I wouldn’t do what you just suggested if I were you.

I have one llc currently that basically signs contracts and collects rent.  It holds no property.

The above structure im referencing I will be setting up in the near future but haven’t yet I’m still researching it.

Last year I had attorney set one up and t cost me 900 bucks which was a mistake on my part.  So I want to do more research this time around.  Don’t use an attorney to set this up.  A cpa, or a registered agent can both do it for much less (assuming single member llc)

I think it’s best to have one llc per state locally registered (some states mandate this anyway) instead of registering a foreign llc.

I got lucky in the fact that I registered my first llc in Ohio and they have no on going annual costs.  The other state I’m in (Tennessee) has a 300 dollar minimum on going cost.  

I believe I know the protection you’re talking about with Nevada and I think Wyoming has the same thing.  The cost in Wyoming is much less 50 bucks a year, and I’ve found a registered agent there for 25 dollars a year.  Registered agent in TN is 49 per year from what I’ve found. 

Again you can make this more complicated by adding trusts and stuff of that nature but it costs more to maintain and set that up. I've seen that costs thousands where as I can set the above structure up (Ohio LLC, TN llc owner by WY llc) for 200 for Ohio, 400 for TN and 200 for WY, which includes the state filing fees and one year of registered agent.

To start I’m likely just going to start with the TN llc, and wait for the WY one. 

Originally posted by @Brandon Handel :

@Ned Carey, So that I know I understand you completely, having my name on it just makes signing papers more meticulous as I have to be careful not to sign as just myself but as a member of my LLC. Am I correct?

 Not exactly, It doesn't make it More meticulous. You need to sign for any company, regardless of the name. as a member (or other officer)

@Caleb Heimsoth , thanks for the link! Definitely going to be looking into all that. I like your strategy too. I knew there was another state that had the same kind of protection as Nevada, but couldn't remember which and definitely didn't know it was that cheap. I'll be looking into all this stuff. Thanks again!

@Brandon Handel there is a big hole with the Nevada/Wyoming LLC Strategy. Most if not all states require you register an out of state company to do business in the state. So the advantages of the Nevada/Wyoming LLC go away.

Now there is a very technical legal question that may not even have an answer yet. It may take the courts to decide if a Nevada company simply owning a company in IN qualifies "as doing business in". Logistically how are you going to get the money to the Nevada company and how are you going to get it back to you?

Another major issue; you are always responsible for your own actions. If you run over a little old lady while driving for the company, you are still responsible as the driver. The company would be also as the employer. The fact that you were doing work for the company at the time, does not change the fact that you are responsible as the driver.

It is easy for people on a forum to spout information without having a strong legal understanding. (No slight against @Caleb Heimsoth he seems to have a better grasp than most on the subject.

@Ned Carey , I see what you mean now. I thought you were just implying that it is easier to make a mistake signing when part of my name is in the name of the LLC as well and that therefore can come back to haunt me if I get caught up in a lawsuit.

Originally posted by @Ned Carey :

@Brandon Handel there is a big hole with the Nevada/Wyoming LLC Strategy. Most if not all states require you register an out of state company to do business in the state. So the advantages of the Nevada/Wyoming LLC go away.

@Ned Carey I'm not sure I understand what you mean with this? Are you saying that in order to get the protection that these states offer I need to have the business/property located in that particular state? I feel I'm totally lost on this part. Please expound on this for me.  

The concept of liability protection from a LLC is double:

- it protects the owner from liability arising from inside the LLC (ie if you are sued for a problem due to the property inside your LLC, they can't touch your own asset that are not in the LLC). This protection is the same in every state.

- it protects your LLC asset from a lawsuit against you personally through the charging order that only grants access to any distribution taken out of the LLC to you, but can't access what is still inside that is not distributed. This protection will differ from state to state going from very weak to very strong. There also could be differences depending if the LLC is single or multi members. The states with the strongest protection as a whole, that also offer anonymity are WY and NV. WY has cheaper fee than NV. Some other states also have charging order as the only remedy, but may only do so for multi members LLC and not single member (like FL).

If you are in a state that does not give good outside protection, the trick is to create another LLC in a State where the protection is strong, and have this holding LLC own the other LLC in the weak state. You then still have the inside protection, but gain the outside protection from the strong state.

Not having your name in the LLC name or in the public records (NV, WY and NM for instance), while not giving any additional asset protection, helps to avoid opportunistic lawsuits that are made only based on what the plaintiff believe your net worth is. If they don't know that you have asset in that early stage, most lawyers working on contingency won't even touch the case as they won't expect a big paycheck at the end of the tunnel.

@Brandon Handel if you have an out of state company that does business in the state, it has to be registered. All secrecy and anonymity that comes from Nevada/Wyonming LLCs is gone. If your out of state company is not registered you may have purchases, contracts etc turned over or voided. It may also cost you any liability protection you think you might have. 

You are asking a LOT of questions here. You are getting some good advice, but these issues can be quite complex. If you want to delve deeper into this issue deeper it should be with a good attorney. In law there are always "ifs and buts", that may make well intended and basically correct not apply in your specific situation.

@Brandon Handel you are in, IN.  (presuming IN is like most states) If your company is doing business in, IN, you must register that company in IN regardless of where it was formed or based. It becomes public info in, IN. The fact that no one can go to Nevada to get your company information doesn't help much when they can get it in, IN.

Wow, after reading about all the LLC's, state requirements, double-blinds I got dizzy. So glad I started using living trusts (aka land trust) 20 years ago. So much less complicated, less expensive, and affords as much or more privacy as an LLC.

PLUS, most attorneys understand workings of an LLC (think easier to sue?) but very FEW understand the real workings of an inter-vivos revocable trust. Remember, no matter how many layers of 'protection' you put in the mix, if someone wants to sue, they will.

The question I would pose: will an attorney take the case on a contingency basis (they get paid when they win a case) or would they want money from their client up front to institute a lawsuit?   

If your anonymous holding LLC (WY, NV) is the sole member of your state LLC, the only information listed in your state LLC registry will be that your anonymous LLC is the member. You won't be loosing anonymity as they won't be able to go the next step to know who is behind the anonymous LLC.

You also pay extra LLC fees/taxes when you open a LLC in one state, but do business in another state. Foreign entity taxes is something you can Google. So on top of your yearly LLC fee to keep it in good standing, you'll pay more because you don't do business in the same state you formed your LLC.

Another example: My LLC recently sold one of its properties in Maryland. My LLC was formed in Maryland. But if my LLC was formed in any other state than the property it sold, it would have paid an additional 8% (if I remember right) fee/tax/penalty upon the sale of that property.

There's no need to make LLC stuff more complicated than it needs to be. Open it in the state you'll do business. And while it might not pierce the veil, I would not personally name my LLC the "Nicole A. LLC". Name it whatever you want, but try to be slightly more creative than your own name. ;-)

Also, in your research, you'll see the old debate of those who think you need one LLC per property vs. those who think that's ridiculous. I am on Team It's-Ridiculous. Instead, come up with a value you're comfortable with....$500K? $1Mil? worth of real estate (and that means you OWN it...not mortgaged in that amount because no one can sue you for property you have next to no equity in). Once you reach your max, *then* form a new LLC and start over. Same for if you start buying in another state. *Then* open a LLC in that same state and put your new RE in it.

Clear as mud? Great! "Visibility" will improve with time, and you can confidently form your own opinion on how best to handle your LLC(s). ;-)

I would encourage you to spend some time on the very informative videos made by Clint Coons. He is a lawyer from one of the asset protection firm that have a good grasp of real estate. There are a few other firms also very specialized in that field, some cheaper, some more expensive. They will all have their small differences and philosophy but it will give you a good primer.

@Brandon Handel Irregardless of your name, if someone has a LARGE suit against you, they will find your interest in other LLCs and try to attach to those and your personal assets. And you'll spend 10s of 1000s to try to defend against that action.

However, think about a quick review from the plantiff's attorney. Maybe they have an "on-the-fence" case. They run your name against the SOS database of LLCs, and easily find Handel Properties. BINGO! Big Money! At least that's what they think. On the flip side, you name your LLC Property Number Street Name LLC, the buck stops there until they decide they are going to try to take you for millions and its worth their deep research to find you and the rest of your properties.

If you aren't building a name with the public - and moreso your actual consumers - your LLC name doesn't matter. In that case name it Company 2948499593 LLC - renters aren't your consumers that you need to "advertise" with a fancy name with, nor are sellers of properties.

Has any effort to obfuscate your identity ever been successful in preventing any lawsuit ever? I’m very dubious when gurus teach this through land trusts etc. the incorporation vehicle may prevent lawsuits in itself, but how would hiding your name deter anyone determined looking to sue? Seems like you would just annoy the court

Thank you all for your help. There seems to be some confusion on here about what the name is exactly for. It's not for the properties itself, it's for the management side. The properties will be in their own LLC that won't have my name on it. Whatever I decide on a name for the management side, it won't own anything. Who knows though, that might all change. Perhaps I may decide I don't want to be as hands-on and will hire the management out to someone else. Perhaps I don't fully understand what all I'm getting myself into as far as owning/running my own property management for my rentals. I think my best course is to follow @Ned Carey 's advice and talk to an experienced attorney. My one question has seemed to generate even more questions for me. Thank you all for your input though. You've given me a lot to think about.

@Steve B. that was my thought too. I can't remember the book, but to the best of my memory, all they have to do is ask you under oath if you own it and you're done. I think anyways. I wish I remembered the exact quote from the book. My understanding is that it does not give you any asset protection though. 

I didn't read all of the comments but the first question I would ask you is whether you really want to include your name in your LLC legal name. The best piece of advice I had when starting out was to say I was a property manager instead of the owner. Why??? Because I could never be put on the spot with decisions and I could respond with "the owner said...".

No issues with this, people do it for many reasons.  I have several LLCs and have my name on the construction company and in a company which is geared more towards branding.

Originally posted by @Steve B. :

Has any effort to obfuscate your identity ever been successful in preventing any lawsuit ever? I’m very dubious when gurus teach this through land trusts etc. the incorporation vehicle may prevent lawsuits in itself, but how would hiding your name deter anyone determined looking to sue? Seems like you would just annoy the court

I can't predict the future of laws, but if wealthy foreign investors are using expensive condo purchases to launder money and other investors are walking away from vacant properties and tax bills in poorer neighborhoods, I suspect the anonymity laws regarding property ownership with be changed. The Supreme Court has said sunlight is the best disinfectant. 

Originally posted by @Steve B. :

Has any effort to obfuscate your identity ever been successful in preventing any lawsuit ever?

The problem is that you would never know how many you avoided. But I could surely see how it can limit your attractiveness against contingency layer.

In case of a judgment against you, you will have to disclose your assets if you are ordered to. But I don't see why you would have to disclose it before. Again anonymity is not enough by itself to protect you, but it is an easy additional layer that has its benefit