Financial Advisor · Glendora, CA · Member since 2015 · 209 posts · 94 votes
Ok landlords,
Who's been sued. Tell me your story and did a LLC help or not help you? Did a large umbrella policy protect you? I think we've all been going about this from the wrong side whether you need a LLC or not. I'd like to hear from people who's actually been sued as a landlord by a tenant.
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
11y
About 15 to 20 years ago me and 4 other people decided we wanted to buy an old oil refinery. It still had a few buildings and about 30 acres inside the city limits. Price was $100K. I insisted we form a corporation and follow all corporate formalities. it was a good investment. Paid itself off and started putting money into our pocket about 6 or 7 years ago. Then the EPA came and checked and found asbestos. They did a forced cleanup for about Five Million dollars. Now we are hoping that they concentrate mostly on the oil company that originally tore down the buildings and buried a lot of pipes covered with asbestos instead of putting them in a landfill. Even with the property being worth about $400K today, since it is in a corporation if they sue us for say half the cost, we can just walk away and they get none of my personal assets. Insurance will cover none of their cleanup costs. I am dam glad I insisted on forming a corporation. I could have potentially lost everything I built for the last 25 years, and I am a little old to start all over again. Anyone here want to fight the EPA in court or bet our government is just too nice to take all my assets if they get a judgement?
Rental Property Investor · SF Bay Area, CA · Member since 2014 · 352 posts · 543 votes
11y
Let's talk about cost. Most people will set up the LLC where the property is located or use the favored Nevada or Wyoming LLC that rich/dad poor dad lawyer Sutton likes to recommend.
If you live in California like many investors in BP, you will be charged an extra $800 on TOP of the fees you are paying for the instate LLC fees.
Also, the veil has been easily pierced for single member LLC.
Let's not forget the added cost of CPA costs with LLC, maintaining separate bookkeeping for each and every LLC, etc..
LLC eat away your cash flow substantially. Get umbrella insurance, and commercial umbrella...live more simply and bypass getting an LLC.
Investor · Thermopolis, WY · Member since 2012 · 4k+ posts · 4k+ votes
11y
About 15 to 20 years ago me and 4 other people decided we wanted to buy an old oil refinery. It still had a few buildings and about 30 acres inside the city limits. Price was $100K. I insisted we form a corporation and follow all corporate formalities. it was a good investment. Paid itself off and started putting money into our pocket about 6 or 7 years ago. Then the EPA came and checked and found asbestos. They did a forced cleanup for about Five Million dollars. Now we are hoping that they concentrate mostly on the oil company that originally tore down the buildings and buried a lot of pipes covered with asbestos instead of putting them in a landfill. Even with the property being worth about $400K today, since it is in a corporation if they sue us for say half the cost, we can just walk away and they get none of my personal assets. Insurance will cover none of their cleanup costs. I am dam glad I insisted on forming a corporation. I could have potentially lost everything I built for the last 25 years, and I am a little old to start all over again. Anyone here want to fight the EPA in court or bet our government is just too nice to take all my assets if they get a judgement?
Investor · Mississauga, ontario · Member since 2014 · 18 posts · 2 votes
11y
I agree with @Jerry West. I think people are missing the point about LLC. the idea of separate entity you and your corporation is reason to have one. It protect your personal assets from creditors and the list goes on. Google the advantages and disadvantages of an LLC to make a decision. I am not a lawyer or guru but I know that LLC is the way to go because of tax benefits. It's understandable when starting out and you don't have the $300+ to incorporate. I think as soon as your business (real estate or any business) gains traction it's wise to get an LLC. I also like the idea that I can take a combination of w2 income and/dividends. Depending on the situation I can be an employee or a director.
I think there was a podcast about this wasn't there?
Yes there was. I forget which one. However in my opinion, it was just a lawyer on the podcast to strike more fear into the community and also forwarding their own agenda to sell more LLC formations to the BP community.
Real Estate Broker · Fairfield, CT · Member since 2015 · 312 posts · 231 votes
11y
Lawyers are awesome - they spend their time dreaming up nightmares that the rest of us never have to face, and then planning to counter or mitigate those nightmares, all while we sleep peacefully. God bless lawyers (the ones on my side at least!).
I cannot say that an LLC has saved my a$$(ets). I can say that I've known someone for whom an LLC did NOT save him - because a really good attorney proved that he had pierced the corporate veil himself by commingling LLC funds with personal, and thus his personal funds were not harbored. Still kept his other assets though - so perhaps that was a saving via LLC?