Podcast 109 co-hosted by a real estate attorney stated an umbrella policy is not enough personal asset protection and that an LLC is needed. However, I have read that on BP a popular theory is that one should form an LLC for business reasons and one should get insurance for protection. Thoughts and personal experiences? Especially for one just starting out?
I believe the consensus (and what was pitched on the podcast) is that doing both is wise any way you slice it. An LLC does limit your liability as it provides for certain protections that prevent the liability associated with ownership in your personal name. Insurance also limits your liability in the sense that when you're properly covered, it minimizes what you might owe personally for insured losses. At Jason Cohen Pittsburgh we teach our clients that you need the protections of a corporate structure and appropriate insurance coverage (along with seeking advice from legal counsel as well as your tax accountant). While this is still not full proof in any way, it puts you in a much better place than going at things under your personal name with limited and/or insufficient insurance. To connect with us feel free to reach out at www.jasoncohenpittsburgh.biz
For me, the necessity of an LLC depends on the asset. For singe-family homes, no. Tax filing is a pain with these things. Getting financing and insuring a single-family in an LLC is a pain as well. I waited until I had 'commercial' property, over 5 units. I put those into an LLC. I open new ones when the commercial assets in that LLC exceed about $2MM. Don't over-sophisticate the ownership of a house. Good luck!
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