Starting my LLC, but I already have the properties

Tax, SDIRAs & Cost Segregation
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Starting my LLC, but I already have the properties

Kyle Meyers
Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes

I've been reading all the posts and blogs about having an LLC in addition to my insurance policies and I thought I should get to it before I get much further into my investing. I have a few questions though that I'm hoping some of you will be able to give me advice on.

1. I already own 2 properties and 3 tax liens in my own name, what would I have to do to transfer these to my new LLC to protect myself from liability? Are there costs to do this?

2. Should my LLC name include my name? I figure it is public information who owns the company so someone could find out, but I have seen that many investors seem to think it is nice to pretend to be a lower level employee of the company. I had been planing to name the company after myself, but now I am starting to rethink that.

3. How would loans work if the properties are going to be held in an LLC, I don't have any loans on the properties currently, but I am looking to finance them when I can so I can continue to invest. Does it change the financing available to me if the properties are in an LLC? I am doing buy and hold rental investing, buying distressed properties and fixing them up to be rentals.

4. Are any new financing opportunities available for me with and LLC? Can I issue bonds or something to fund the business? I would prefer to have as many forms of financing available as possible and I really like the idea of offering a note to an investor with a specified interest rate that I know I can pay than partnering and having someone else have a say in how I run my business. I love getting advice from others, but at the end of the day I want to be able to make the important decisions on my own.

Thanks in advance for any help you can give.

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Mitch Kronowit
SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
15y
Originally posted by Mandy Morrow:
Mr. Kronowit-
First, thank you for taking the time to reply.

I have question, I have heard that I should have my LLC BEFORE purchasing my first propertry, is that correct? The idea being that the LLC would have the property from the beginning and offer protection.

Hi Mandy,

First of all, the name is "Mitch". "Mr. Kronowit" is what my daddy's called. :wink:

Next, I really wish someone with more experience and knowledge, like an attorney (I know you're out there!) would contribute to this post. I'm not comfortable handing out a lot of advice on this topic because all I have to go on is my own 1 year experience owning an LLC and what I've heard from others. That is why I retain the services of an attorney who specializes in asset protection.

Ok, that being said, in an ideal world you would form your LLC, then purchase a property shortly afterwards. After all, there's little use in paying for and maintaining an LLC for years prior to making a purchase, especially in California. Forming an LLC and sitting on it for 2 years or more before making a purchase is NOT going to get your LLC a home loan.

In an ideal world, you would locate and buy a prime piece of investment real estate and take title in your LLC's name at closing. However, with most lenders today afraid of their own shadows and sitting around with a 3' lead pipe up their posteriors, you may have to take title in your own name and transfer it to your LLC after closing.

In an ideal world, the lender would never care that you transferred your property over to an LLC, even if it was for "estate planning" purposes, so we could all be open about it up front. But as it stands now, we rely on the fact they either don't know, don't care, or simply have too many other things to worry about. Hopefully, interest rates stay relatively low so lenders don't begin getting the itch to call all these loans sending us into another real estate meltdown. They wouldn't be THAT stupid, would they? Don't answer that! :roll:

In an ideal world, once the equity in your investment property is over 50% of its value, you would be able to refinance it in the name of your LLC. After all, what idiot would default on all that equity? Don't answer that either! :mrgreen:

My final piece of advice is hold your rental properties, i.e., your PASSIVE investments in an LLC and perform your ACTIVE operations, such as flipping, wholesaling, etc. under your S-Corp. There's plenty of info right here on BP why your real estate empire should be structured this way.

Best of luck and keep in touch.

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  • Stefan Forsberg
    Real Estate Investor · Garland, TX · Member since 2010 · 86 posts · 34 votes
    15y

    Hi Kyle,

    I am by no means an expert on LLC's so I am sure some of our more experienced member will jump in soon.

    1. for the properties you can quit claim the deed to the LLC, if you don't have a mortgage this should not be to much of a problem. Yes there is a cost involved, the documents should be registered with your county clerk and they are usually prepared by a attorney/title office that will charge for their services. For the Tax notes I really don't know how/if you can transfer them to your LLC.

    2. Your LLC can be named anything you want, just make sure you check so you don't get sued for copyright infringement if you pick something that is close to a well known brand. I would suggest you meet with your attorney/CPA to discuss the most beneficial business structure for your strategy (i.e. how to legally pay the least amount of taxes).

    3.Loan will almost certainly have to be personally guaranteed, as far as I know there is no one today that will loan to a new LLC without personal guarantees, there are also some lenders that will not let you hold title with an LLC even if you give them a personal guarantee.

    4. If you are going to seek additional funding you should probably have one LLC per project (property), if you don't you will have a nightmare trying to keep the Operating agreement (which is the bible of the LLC) updated to include who does what, who gets paid when, who makes the decisions etc.

    Hope this helps as a start, I am sure more experienced investors will chime in soon..

    0Reply
  • Mark Forest
    Real Estate Investor · Fenton, MI · Member since 2008 · 946 posts · 153 votes
    15y

    Kyle:

    I am curious as to why you decided to go through with all this effort. From what I have read LLCs, S-corps, C-corps, etc do not really offer the protection most people think they do. I have heard it directly from an attorney that it is simply a matter of filing the right papers to “pierce the corporate veil,†and access the owner of the corp.

    Furthermore I have also been told that you can no longer represent the LLC for even simple court cases like routine evictions. Only a licensed attorney can represent your company.

    If anyone thinks I am wrong please correct me.

    0Reply
  • Kyle Meyers
    OP
    Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes
    15y
    Originally posted by Steve Might:
    Kyle:

    I am curious as to why you decided to go through with all this effort. From what I have read LLCs, S-corps, C-corps, etc do not really offer the protection most people think they do. I have heard it directly from an attorney that it is simply a matter of filing the right papers to “pierce the corporate veil,†and access the owner of the corp.

    Furthermore I have also been told that you can no longer represent the LLC for even simple court cases like routine evictions. Only a licensed attorney can represent your company.

    If anyone thinks I am wrong please correct me.

    Steve,

    I had thought that as well and that is why I had not done anything until this point, but I started reading up on the posts about it and I thought that even if it doesn't really fully protect me, it would at least be another layer of buffer. I am seeing that it may be more difficult to get funding though and I might opt to stick with doing everything as myself for that reason.

    0Reply
  • Mandy Morrow
    Handyman · San Diego, CA · Member since 2011 · 21 posts · 5 votes
    15y

    If you do get a corp, look into getting it in Nevada or Deleware. Nevada is better. There are no reporting laws in Nevada. BUT READ up on it, if you do it wrong, you could be commiting fraud. Rich Dad Own your own corp. is a good basic start. Also Google Nevada Corp Headquarters.

    0Reply
  • Mark Forest
    Real Estate Investor · Fenton, MI · Member since 2008 · 946 posts · 153 votes
    15y
    Originally posted by Kyle Meyers:
    I had thought that as well and that is why I had not done anything until this point, but I started reading up on the posts about it and I thought that even if it doesn't really fully protect me,…

    With the reporting, tax and other requirements, and the inability to not represent your companies do you still think it is worth it? I am not arguing, just curious.

    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y

    I was hoping somebody with much more knowledge and experience would add to this discussion, but since nobody has, I want to throw out a few things.

    First of all, I've only had my LLC for about a year and have not had it challenged yet. However, everything I've researched says in order to enjoy the liability protection from an LLC or Corporation, you HAVE TO MAINTAIN it properly. That means NO co-mingling of funds. NO actions that benefit the owners to the detriment of the entity. NO ignoring your state department's reporting requirements. Basically, treat your company like a separate entity and so will the courts.

    Now, I would like to hear more from this attorney who says he can "pierce the corporate veil" by simply filing a few papers. My understanding is "piercing the corporate veil" requires a successful legal challenge to the sanctity of a limited liability entity, not just naming the owner(s). If corporations didn't provide any liability protection for its shareholders, how come I've never been personally served when Boeing, Chevron, or Cisco got sued?

    And as Kyle stated, operating your business within an entity is not the end-all, be-all in "bulletproof" protection, just another layer of your empire's onion. You still need insurance. You still need to behave responsibly. Having an LLC or a Corporation is not a license to steal, be neglectful, or act recklessly. For that you need to hold a Congressional office. ;-)

    2Reply
  • Kyle Meyers
    OP
    Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes
    15y
    Originally posted by Steve Might:
    Originally posted by Kyle Meyers:
    I had thought that as well and that is why I had not done anything until this point, but I started reading up on the posts about it and I thought that even if it doesn't really fully protect me,…

    With the reporting, tax and other requirements, and the inability to not represent your companies do you still think it is worth it? I am not arguing, just curious.

    I think I am going to just keep everything in my name for now. It doesn't really seem worth it to get the llc for me right now. I am keeping it in mind for later on. As I get more properties, I will think about whether it makes sense for me to set it up.

    0Reply
  • Kyle Meyers
    OP
    Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes
    15y
    Originally posted by Mitch Kronowit:
    I was hoping somebody with much more knowledge and experience would add to this discussion, but since nobody has, I want to throw out a few things.

    First of all, I've only had my LLC for about a year and have not had it challenged yet. However, everything I've researched says in order to enjoy the liability protection from an LLC or Corporation, you HAVE TO MAINTAIN it properly. That means NO co-mingling of funds. NO actions that benefit the owners to the detriment of the entity. NO ignoring your state department's reporting requirements. Basically, treat your company like a separate entity and so will the courts.

    Now, I would like to hear more from this attorney who says he can "pierce the corporate veil" by simply filing a few papers. My understanding is "piercing the corporate veil" requires a successful legal challenge to the sanctity of a limited liability entity, not just naming the owner(s). If corporations didn't provide any liability protection for its shareholders, how come I've never been personally served when Boeing, Chevron, or Cisco got sued?

    And as Kyle stated, operating your business within an entity is not the end-all, be-all in "bulletproof" protection, just another layer of your empire's onion. You still need insurance. You still need to behave responsibly. Having an LLC or a Corporation is not a license to steal, be neglectful, or act recklessly. For that you need to hold a Congressional office. ;-)

    I think one difference between being a shareholder of a company and the sole owner is that you are making all the decisions. My understanding is that someone may be able to successfully sue you for a decision you made, not based on your ownership. Since I make all the decisions for my investing, I would not really get much benefit from the llc (I think). If you don't make all the decisions or have employees, I would definitely think and LLC makes a lot more sense. I really don't know, this is just based on things I have read and people I have talked to. In any case, it is at least another layer of protection, I think I am ending up with the decision that the level of protection I think it would provide in my situation is not worth the hassles I would have.

    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Kyle Meyers:
    I think I am going to just keep everything in my name for now. It doesn't really seem worth it to get the llc for me right now. I am keeping it in mind for later on. As I get more properties, I will think about whether it makes sense for me to set it up.

    What is the benefit of keeping your properties in your own name? If you doubt the ability of an LLC to protect you from your rentals, what kind of protection do you think you'll have without one?

    I just read a story about 2 landlords that several years ago owned adjacent 4-plexes. One was anal, took out a ton of insurance (liability, loss of rent, umbrella, etc.) on his building and held it in an LLC. The other thought all that was a waste of time and money and only purchased the minimum amount of insurance while holding all his properties in his own name. One day a lightning storm burned both buildings to the ground. Nobody died but there were injuries. The anal landlord was completely covered and was able to buy his neighbor's lot, building a brand new modern 8-plex on the land. The other landlord was sued for everything he had, including several other rental properties, and was forced into bankruptcy.

    Moral of the story? Insurance first, LLC second. The more walls between your risky rentals and your own assets, the better. Plus, I like the privacy afforded by placing the LLC's name between me and my tenants.

    Waiting to get more properties before forming an LLC accomplishes what? The LLC isn't there to protect your rental properties, it's to protect your personal assets such as your residence. Of course, if you don't have any personal assets, except for the rental properties, then, yes, an LLC doesn't have much to protect.

    1Reply
  • Mandy Morrow
    Handyman · San Diego, CA · Member since 2011 · 21 posts · 5 votes
    15y

    Waiting to get more properties before forming an LLC accomplishes what? The LLC isn't there to protect your rental properties, it's to protect your personal assets such as your residence. Of course, if you don't have any personal assets, except for the rental properties, then, yes, an LLC doesn't have much to protect.

    Mr. Kronowit-
    First, thank you for taking the time to reply.

    I have question, I have heard that I should have my LLC BEFORE purchasing my first propertry, is that correct? The idea being that the LLC would have the property from the beginning and offer protection.

    We have an S Corp already for our business. I'm sitting here thinking that before I can even think of purchasing I should have an established corp (min 2 years) before buying.

    Is it better to go buy the home then put it under an LLC?
    Is the S Corp enough to protect our business and would the LLC provide more protection should the property go sour so that no one could go after the business?

    Your input is greatly appreciated.

    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Mandy Morrow:
    Mr. Kronowit-
    First, thank you for taking the time to reply.

    I have question, I have heard that I should have my LLC BEFORE purchasing my first propertry, is that correct? The idea being that the LLC would have the property from the beginning and offer protection.

    Hi Mandy,

    First of all, the name is "Mitch". "Mr. Kronowit" is what my daddy's called. :wink:

    Next, I really wish someone with more experience and knowledge, like an attorney (I know you're out there!) would contribute to this post. I'm not comfortable handing out a lot of advice on this topic because all I have to go on is my own 1 year experience owning an LLC and what I've heard from others. That is why I retain the services of an attorney who specializes in asset protection.

    Ok, that being said, in an ideal world you would form your LLC, then purchase a property shortly afterwards. After all, there's little use in paying for and maintaining an LLC for years prior to making a purchase, especially in California. Forming an LLC and sitting on it for 2 years or more before making a purchase is NOT going to get your LLC a home loan.

    In an ideal world, you would locate and buy a prime piece of investment real estate and take title in your LLC's name at closing. However, with most lenders today afraid of their own shadows and sitting around with a 3' lead pipe up their posteriors, you may have to take title in your own name and transfer it to your LLC after closing.

    In an ideal world, the lender would never care that you transferred your property over to an LLC, even if it was for "estate planning" purposes, so we could all be open about it up front. But as it stands now, we rely on the fact they either don't know, don't care, or simply have too many other things to worry about. Hopefully, interest rates stay relatively low so lenders don't begin getting the itch to call all these loans sending us into another real estate meltdown. They wouldn't be THAT stupid, would they? Don't answer that! :roll:

    In an ideal world, once the equity in your investment property is over 50% of its value, you would be able to refinance it in the name of your LLC. After all, what idiot would default on all that equity? Don't answer that either! :mrgreen:

    My final piece of advice is hold your rental properties, i.e., your PASSIVE investments in an LLC and perform your ACTIVE operations, such as flipping, wholesaling, etc. under your S-Corp. There's plenty of info right here on BP why your real estate empire should be structured this way.

    Best of luck and keep in touch.

    4Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y

    I would have to agree with what Mitch has been stating. I have had entities for 15 years and have never had the "corporate veil" pierced (knock on wood) or been sued and for good reason. The reason being that I have not operated my business in an improper manner, I have never not payed somebody back, have never cheated somebody, and have never acted negligent. Keeping your books straight and seperate is the first step.

    I also agree that having an extra layer of protection is beneficial in addition to proper insurance.

    This I strongly disagreew ith and discourage. Doing this is ONE way to have your corporate veil pierced. Unless you register your entity in the state in which the propert is located (the state in which you are doing business), you give up the protection teh entity offers. Forming Nevada corps is a guru scam to sound genius and creative just to seperate peoples money from their wallets. Don't listen to it.
    If your property is in CA and you form a Nevavda Corp, you have no legitimate protection unless you register that entity as a foreign entity in CA and thus, defeat the purpose.
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    1Reply
  • Account Closed
    Property Manager · Atlanta, GA · Member since 2008 · 51 posts · 61 votes
    15y

    You can piece the corporate veil if you fail to operate your LLC according to laws. If you lapse at doing this then it can easily be pierced. If you manage your LLC correctly then it can be pierced.

    No you do not need to have your LLC before you purchase your first property. I did not. You quit claim deed them into the LLC when the LLC is created.

    Keeping everything in your name means that you can have everything you own taken from you if you are sued. That means your house, your car, your savings account and your retirement accounts.

    In a an LLC if they get a judmgnet against the LLC then they can only get the company. Not your car, your house, your savings account or your retirement account. You are much better off with an LLC than keeping everything in your own name.

    I would say pony up $150 and talk to a good cpa. Better pay that than to lose your own house and car in a lawsuit. That is unless you home and car is worth less than $150 then it that case keep everything in your name since you have nothing to lose.

    Jennifer

    1Reply
  • Mandy Morrow
    Handyman · San Diego, CA · Member since 2011 · 21 posts · 5 votes
    15y

    Mitch-
    Thank you very much that makes sense and you saved me from sitting and managing an LLC for 2 years. I see you are in SoCAL too and would love a referal to an asset protection attorney if you feel comfortable refering to me. If not, no hard feelings taken.

    Will-
    We are foreigned filed here in CA, I understand why it doesn't work if we are not. We incorperated in Nevada because if sued we were told we would be figthing with Nevada Law on our side, instead of CA law which is more consumer friendly.

    Jennifer-
    I do have a CPA, she recommened I get an attorney hahah. But I haven't found an attorney who deals with incorporating in Nevada and foreign filing in CA. I've just been going down the phone book, referals are welcomed!

    Thank you all.

    0Reply
  • Kyle Meyers
    OP
    Residential Landlord · Indianapolis, IN · Member since 2010 · 592 posts · 138 votes
    15y
    Originally posted by Mandy Morrow:

    We incorperated in Nevada because if sued we were told we would be figthing with Nevada Law on our side, instead of CA law which is more consumer friendly.

    I would check with a lawyer. This has to do with jurisdiction and venue. I think anyone who wanted to sue you for something you do in CA would have no trouble proving that they can sue you in CA (jurisdiction) and that it is the best place to do so (venue). I am not a lawyer, so I am not positive about this, but I recently took a law class and these issues were some of the first things we discussed.

    0Reply
  • Mandy Morrow
    Handyman · San Diego, CA · Member since 2011 · 21 posts · 5 votes
    15y

    Yes I DO need a lawyer to cover my butt. But the below is a good read.

    From : http://en.wikipedia.org/wiki/Nevada_corporation

    A Nevada Corporation is a corporation chartered under the laws of the U.S. state of Nevada.
    Nevada, like the state of Delaware (see Delaware corporation), is well known as a corporate haven. Many major corporations are chartered in Nevada, particularly corporations whose headquarters are located in California and other Western states.
    The reason for this sort of a choice is that, in general, in the United States, a corporation which operates in more than one state (or country) has a particular state where it is incorporated, to which it is a domestic corporation. In all other states where it operates and has filed papers to be allowed to operate, it is a foreign corporation, and the requirements for corporate governance in the case of a lawsuit do not use the law where the corporation is sued, but instead, the law where the corporation is a domestic corporation. Nevada offers for US citizens or residents certain advantages over Delaware (while most US aliens prefer Delaware over Nevada).

    0Reply
  • Mandy Morrow
    Handyman · San Diego, CA · Member since 2011 · 21 posts · 5 votes
    15y

    I have also read many Nevada Myths websites too so I do see and understand there is another side to the coin. This might not work for our benifit, but then again it might. One can only hope I never need to test it and that we never get sued haha!

    0Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y
    I concur. Makes no difference what state the entity is formed in, if it is doing business in another state and a party from that other state intends to sue, count on them using that states jurisdiction.
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    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Mandy Morrow:
    Mitch-
    Thank you very much that makes sense and you saved me from sitting and managing an LLC for 2 years. I see you are in SoCAL too and would love a referal to an asset protection attorney

    Sent you a private message.

    0Reply
  • Jonathan George
    Real Estate Investor · Clarksville, TN · Member since 2011 · 3 posts · 1 vote
    15y

    I feel having an LLC is better then not having one. Like many of you I am no expert but I have been working towards using my LLC exclusively. Yes, credit in an LLC comes with time; correct no one will give credit to a newly established LLC without using an individuals personal credit profile or guarentee.

    I know you also use the LLC to keep financial liabilities out of your personal liability, meaning they may run your credit when applying for LLC credit card etc, but when and if approved the liability will fall under the LLC and not under both. You can call any small business credit card company and they should explain this to you. Why apply for loans and financing in your own name? If you do then eventually it will limit your credit worthiness; either you'll be too extended or your debt to income ratio will prevent you from applying for additional financing. After so many inquireies you lose five points per consented request. Protect your persoanl credit score by all means, because until your LLC has established credit you'll need it to do so.

    Also, you'll create the LLC for tax purposes. Deductibles such as education expense, corperate life style expense, start up cost deductions (I believe the first $10,000 is 100% deductible), and a bunch more help you offset some of that capital gain that don't get rolled back in. Not a tax expert but I think taxes reasons go hand and hand with liabilities. Seek the advice of your CPA for the specifics.

    1Reply
  • Mark Forest
    Real Estate Investor · Fenton, MI · Member since 2008 · 946 posts · 153 votes
    15y
    Originally posted by Mitch Kronowit:
    If corporations didn't provide any liability protection for its shareholders, how come I've never been personally served when Boeing, Chevron, or Cisco got sued?

    Because it would be a waste of time for an attorney to do this. A publicly traded C-corp can have hundreds of thousands of shareholders. These shareholders do not make any management decisions. An “owner†of a single LLC makes all the decisions and he or she is in fact the LLC.

    0Reply
  • Mitch Kronowit
    SFR Investor · Orange County, CA · Member since 2009 · 1k+ posts · 1k+ votes
    15y
    Originally posted by Steve Might:
    These shareholders do not make any management decisions. An “owner†of a single LLC makes all the decisions and he or she is in fact the LLC.

    I think you're equating common-sense with the letter of the law. :wink:

    In a limited liability entity, e.g., Corporation, LLC, LP, the owners/shareholders/members/limited partners are NOT personally liable for torts committed on third parties unless there is evidence of fraud, misrepresentation, neglect, recklessness, etc. Saying "he or she is in fact the LLC" requires you to successfully prove the entity is being operated as an "alter-ego". Otherwise a properly formed and maintained entity is NOT in fact the same as the owner.

    I haven't come across anything that states the "decision maker" in a company is the one ultimately held liable, it's usually the "owner" unless protected by an entity. What if a sole-proprieter hires a manager to operate his company (think real estate investor and property manager)? If the manager makes a poor decision and harms somebody, do you think the owner won't be named in the law suit? If the owner made a poor decision in hiring the manager, why wouldn't the stockholders of BP be liable for the Gulf Oil spill since they elected the Board of Directors that ran the company?

    I understand it seems perfectly logical that a sole-member operated LLC should be held liable for his decisions, but what if something happens NOT stemming from a decision? I gave an example of two landlords that each owned a 4-plex that were burned down by a lightning strike? Can you point out the decision they were guilty of making that resulted in the fire? The buildings were in compliance with all building codes so the landlords really didn't do anything wrong. But the one that held his building in his own name got sued? Why, because of a poor operational decision he made or simply because he was the "owner"?

    I'm still waiting to hear from some LLC and Corporation owners out there that have been sued so we can hear the outcome. Did the entity protect you or not? If your "corporate veil" was pierced, what were the grounds?

    I'll reiterate, operating your business within an LLC, Corp., LP, etc. is just one layer of the protection "onion". In fact, the primary reason we formed our LLC was more for privacy (keeping our personal existence invisible to our tenants) than for limited liability. But if for some reason our $1 million in liability insurance isn't enough, it's nice to know we still have the LLC to help protect our personal assets. Otherwise, why would these entities have been created and adopted in all 50 states if they were ineffective?

    0Reply
  • Kyle Weimer
    Real Estate Investor · Aurora, CO · Member since 2009 · 155 posts · 60 votes
    15y

    I would definitely put all rentals into LLC's.
    And I would only put two to three in each LLC. therefore if one LLC is sued and they win you won't lose all your assets, just what is attached to that particular LLC.

    1Reply
  • Will BarnardPro Member
    Moderator
    Developer · Santa Clarita, CA · Member since 2008 · 15k+ posts · 10k+ votes
    15y
    Originally posted by Kyle W.:
    I would definitely put all rentals into LLC's.
    And I would only put two to three in each LLC. therefore if one LLC is sued and they win you won't lose all your assets, just what is attached to that particular LLC.
    The number of properties should not be the determining factor for your LLC, but the equity exposure. In other words, if you had 10 properties each with only $10k of equity or another LLC with 2 properties with $50k equity each, you effectively have the exact same equity risk exposure (100k). The number of properties has nothing to do with that.
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    4Reply
  • Bill Gulley
    Investor, Entrepreneur, Educator · Springfield, MO · Member since 2009 · 21k+ posts · 12k+ votes
    15y

    Way up there, there was a question orcomment about an LLC having to be represented by an attorney in any court action....yes, that is correct, it is a seperate entity and non-lawyers can not represent another. I have an attorney I have worked very well with and he cuts the rate if he just needs to show up and shut up.

    IMO, insurance first, then having the LLC. Then limiting assets in the LLC to reduce exposure is a good tactic. Having multiple LLCs and segregating duties, responsibilities and financing held by a low risk entity is a good way to go also. Making ligitimate loans or creating obligations, like retirement contributions can keep an LLC leveraged to reduce the chances of being a target.

    The very best way to limit liability is to keep properties in good condition and conduct your business in a lawful, open and honest manner.

    1Reply
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