LLC Parent/Child for Multifamily/Commercial Properties?

Question

I recently heard about parent/child LLC's.  I'm wondering what is the best set up for multifamily/commercial properties?

Anyone purchased their LLC from VALIS International?

I heard Delaware is the best place for LLC, but that you need your LLC in the state you are operating?   Does that mean I have a parent LLC in Delaware, then create child LLC in states I would have my investment properties in?  I live in Canada.

Greg Scott · Answer

The attorneys I have worked with when buying a large apartment complex have all recommend one LLC for holding the property and one for managing it.  Most seem to like there to be a business reason for the state you use to create the LLC, either the property is there or you live there.  None have proposed to us a parent / child LLC. Since I'm not a lawyer, there might be a specific reason, depending on your situation, why that might be useful.

On the other hand, I've seen crazy large structures for small portfolios, and there are many attorneys willing to charge you for the help of setting them up.  I had a buddy with 5 SF rentals.  He had one LLC for each rental, a management LLC, and all of those LLCs were owned by a Wyoming LLC.  He must have spent gobs of time and money every year maintaining the books and the structure.  Sadly, if he didn't do it right, all the structure was pretty much worthless, because it could have gotten thrown out in a court case.

Melanie P. · Answer

Your questions about buying an out of state LLC through a website with 100 popups does not go with "commercial and multi family property" acquisition. If you are purchasing something that is extremely  high value, consult with an attorney and get the proper entity for your specific use.

If you're looking to form an LLC and use it to buy tutorials and training programs and stuff, you don't need it, but go ahead and treat yourself if you'd like to have one.