CHART: Illinois Series LLC vs. Individual LLC vs. Delaware

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I'm at the point where, for my protection, I need to establish LLCs and make sure they're in my living trust. In order to figure out the costs of doing this in IL (where all my current and future properties are/will be) I put together the chart below to compare costs of incorporating Series vs. Individual LLC vs. Delaware. I thought maybe other BP'ers would like to see it.

Couple of assumptions that are unique to me: all properties are in IL. For added protection if filing in Delaware, I would have also done an individual LLC as a "management company" in IL. That way someone would have less success challenging the legitimacy of my Delaware LLC. DISCLAIMER: I am not an attorney and you should verify anything you do independently!

At my other business I prepare income tax returns. Here are a few things you need to consider.

One of my clients has a series LLC. When I look at the Illinois Secretary of State website I can located every property with one search. because the entire series is published by the state.

A single member LLC can treat their LLC as a disregarded entity and it flows through to their personal income tax return. This means a court order to produce your income tax return will list all of your properties. UNLESS the only entity is shown on your return is a customer facing LLC.

A multi member LLC must file a separate return and it is due on March 15th. The late filing penalty is $195.00 per month per member. I have appealed $5,000 penalties for my clients when they come to me going I didn't know!

If you have a Delaware LLC and do business in Illinois you must file in Illinois as a foreign entity and that pretty much wipes out why you went to Delaware in the first place. So now you pay you must pay for a registered agent in Delaware, file a Delaware LLC franchise fee. Then you get to file not one but TWO state income tax returns followed by the franchise fees and registration fees in Illinois.

If I were in your shoes I would start researching the Illinois Land Trust to hold title to your properties. Set up one Illinois LLC or corporation. Make that LLC responsible for all of the liability aspects of your business. The LLC should own nothing. The LLC should rent the individual properties on a triple net lease from the Land Trusts with a right to sublet. The LLC should own nothing but a check book or two.

The Land Trusts provide a layer of privacy and avoid probate. They have no annual cost. The are part of your privacy protection. That is the only asset protection they provide.

Buy one million dollars of liability insurance for each property in the name of the LLC and show the Land Trusts as additional interests, Then buy a minimum of one million dollar commercial liability umbrella to cover everything. The Umbrella protects you against more types of claims than the rental policy.

In summary one business entity controls everything and owns nothing. When set up correctly Land Trusts provide absolute privacy and avoid probate. Insurance will give you a better defense than owning 15 or 20 LLCS. All it takes is one judge to unravel everything you have set up and struggled with. A good attorney will ask to see your personal and business income tax returns and find it all anyway.

Join your local REIA. Learn from others in the group. The best group in Northern Illinois is run by Jane Garvey. "The Chicago Creative Investors Association" meets one Sunday night each month in Lombard, IL.

Get an attorney. If you don't have one PM me and I can set you up with a good law firm in Chicago that will charge you $44.85 a month to answer all your questions, send out collection letters and so much more. My contact information is below this post.

Good Luck and Good Investing.

Thank you for all of that information. Follow up question: Do you have any insight on using my revocable living trust instead of the land trust? Where I finally landed (for now and need to make the decision and go through with it!) is that I'll do a single member single LLC for all my properties until I hit property number 5 and then make sure that the LLC/Properties are in my revocable living trust. Once I hit 5 I will reassess. And - agreed on the insurance policies. I am on solid footing with my attorney, but could use some recommendations on insurance agents who work with real estate investors.