Asset Protection using Multiple LLCs - thoughts?

Question

There was a thread from 7 years ago regarding this question of owning separate LLCs (+/-) a holding company for asset protection, and wondered today’s opinions regarding this and had some additional questions.  I apologize in advance if I missed a recent post that covered this.

My question has three main aspects:

1) If you own multiple properties under multiple LLCs:  If these LLCs are all operating in the precisely same fashion, but all share the same sole owner, won’t an attorney realize this and identify that there is a common entity (“piercing the corporate veil”)?

2) If you keep all properties within a single LLC:  If you carry enough insurance to cover the total assets within that LLC (perhaps even 2-2.5x the value of the assets), would this not dissuade a plaintiff from going after these assets ? (“Take the easy money from the insurance company, vs. take the risk and go to court” ?)

3) Does forming another “legal wall” by creating a holding company for multiple LLCs actually offer any extra asset protection?  I am no legal expert, but my thought was that once an attorney views the holdings of the holding company, AHA! - lo and behold, there are multiple little LLCs that all operate as one big entity - again "piercing the corporate veil".  Likewise, wouldn't this make it very easy for an attorney to identify all properties in one fell swoop?)

Thanks!

David C. · Answer

@james

@James Wise  Excellent points - Especially about the licensed individuals.  A lot of times, I have seen people trying to get someone "quick and cheap" to do a job, but unlicensed.

James Wise · Answer

Running a portfolio with 1,000's of tenants I can tell you for a fact that the most important thing you can do for asset protection is to take care of your properties. If there isn't any negligence it's pretty safe to say you won't be in a high risk situation.

•  Make sure you only hire licensed individuals to work on your properties.
• Make sure you have a written lease for all tenants.
•  Make sure your properties meet or exceed local, state and federal building codes.

David C. · Answer

replied about 2 hours ago

Just get an umbrella insurance policy to cover yourself and you wont have to deal with all this confusion.

----------Thanks for the input. But I am really looking for answers to the specific questions raised above.

i.e. I have an umbrella policy already, and realize that this option is available -> in essence someone could insure a portfolio of $1 MM  with a $500 MM umbrella policy and would be able to sleep well that they are well protected (obviously one wouldn't do that).  I'm hoping that someone may have some experience/expertise regarding the above questions/situations.

Mike S. · Answer

@David Cozzi

You are using multiple LLC to insulate each asset from each other.

If you put all your properties in one LLC, any inside liability rising from any of them can jeopardize all of them.

By using a different LLC per property, the most you can loose is one property.

Liability insurance will not protect you from everything. Insurance and LLC are not exclusive and in fact are both highly recommended.

I would suggest that you dig into the hours of excellent YouTube channel videos from  Clint Coons that will explain all these concept in depth.

Matthew Crivelli · Answer

Just get an umbrella insurance policy to cover yourself and you wont have to deal with all this confusion.