presented by
Keeping entities active for liability protection
I recently completed a project where we purchased a 4-plex in Los Angeles, did a major renovation and then sold the units individually to separate buyers who purchased as Tenants in Common (TIC). The entity structure we used was a limited partnership where I acted as GP via an LLC and then had investors who were LPs. In preparation to dissolve the two entities (limited partnership and LLC) I spoke to an attorney who has advised keeping both entities open for at least four years to protect against 3rd party claims. He also advised maintaining a reserve for contingent liabilities.
Since this is CA the annual cost to keep the entities active would be $800 a piece for CA LLC fees plus a couple hundred bucks to file tax returns.
Is it typical to keep these entities active for liability protection? Would it change if this were a single family flip or a large scale development?