Hello to all my fellow NH investors,
I was wondering if anyone had a referral to a lawyer who could help me out with how to structure my business from an asset protection standpoint. Anyone work with an attorney they would feel comfortable recommending? If it helps, I mainly work in the Manchester, NH area.
I saw your presentation last week. Great job and very interesting!
I’m not sure if your set on local, but we actually work with Royal Legal Solutions, which you’ll find the owner Scott all over this site and the podcast circuit. Everyone has a different opinion, but the series Llc setup worked best for us.
Hopefully we get the chance to talk at one of the future meetups!
Hi Axel! I'm emailing you directly with a recommendation.
@Axel Ragnarsson Messaging you a recommendation
@Axel Ragnarsson - I can message you a couple referrals that the trust lawyer we have gave us.
I am not an attorney. @Daniel C. , the Series LLC is very interesting, and sounds like it solves lots of issues, but I believe if you check with a NH attorney who is knowledgeable in asset protection, you'll find that it is not recognized in NH. Or MA either, for that matter. So you may have troubles down the road. Or need to register each sub-LLC in NH if it owns property in NH. That sort of negates the whole point of the series LLC.
It's great to get input from all over, but at the end of the day, any time the question is a legal matter, we need to stay local.
@Axel Ragnarsson Hi Axel. I would be happy to discuss asset protection options with you.
When I sit down with clients I will always discuss (1) their personal assets, (2) what their current investments portfolio and other business ventures before discussing (3) their future goals. Each of these variables will dramatically change the advice I give the individual asking me this question. I often break it down into the "five pillars" of protecting your assets.
The first pillar is avoiding unnecessary and risky activities (don't drink and drive, insurance generally won’t cover your poor decisions) and take good care of your investments - these simple steps will help you prevent lawsuits before they even occur.
The second pillar is a good insurance policy as that cover the majority of your exposure. However, insurance is limited because it only protects you from one type of liability: accidents/negligence. Insurance doesn’t protect you from any part of the sale or acquisition of a property (e.x. Somebody wanting to sue for you backing out of a bad deal or accusing you of selling them a property with defects like unknown termite damage). Insurance also doesn’t protect you from misunderstandings, especially those made in writing and email. What happens in these misunderstandings is that something goes wrong either in the sale or after, and then they sue you for some statement you made that they “misunderstood”. That lawsuit is a claim for fraud, and that’s what fraud typically is...a misunderstanding and someone being “injured” and wanting to hold the other responsible for it. Insurance never protects you from these kinds of claims and they happen all the time.
The third pillar applies after you have good insurance You need to protect yourself from what insurance doesn't cover by compartmentalizing your assets. Compartmentalization means that if something happens to one property they can't touch you or the other properties. You should use either LLC's (the old and expensive way) or a Series LLC (the new and more cost/time effective way). No matter where you live or where you own assets, I personally recommend the Series LLC to be a great tool for the individual investor who is planning to expand their operation, as it allows for you to scale infinitely for FREE- check out this article to learn more.
The fourth pillar is somewhat similar - you want to separate your operations from your assets. One company owns everything and does nothing (this is your SLLC a/k/a "asset holding company") and a completely separate company handles all of your operations (this is a traditional LLC a/k/a "operating company") For the operating company which serves as your face to the world and through which you do all your business, you establish a Traditional LLC to carry out the operations of your investments. The operating company takes on all of the liability that would otherwise blow back on you including: paying property management, paying contractors, collecting rent, marketing, etc.
The fifth pillar is owning everything anonymously. If people don't know what you own, then they are less likely to sue. People don't sue people that qualify for food stamps. This anonymity can be accomplished for free by using Trusts to own your companies as well as the assets. Trusts create this anonymity by removing your name from public record. Even if they can see you used to own a property, when properly transferred it will look like it was sold to investors. If they somehow guess you are the owner still, it doesn't matter because you are not the owner. The trust and the LLC are the owner of the asset/real estate, so even in the scenario that they guess, they guess wrong.
You can leave a reply of DM me if you have more questions.
@Ann Bellamy Thank you for your input on this - I'll be sure to do some due diligence regarding Series LLCs. I've received some great NH referrals, I'll certainly be busy!
@Scott Smith Scott, I appreciate your detailed response. I've been doing research on Series LLCs and was wondering if you are aware of issues regarding the use of this structure in NH?
Hey Axel - There are no "issues" or downfalls in my opinion for using the Series LLC for properties located in NH. My current clients use the Series LLC to hold assets in all states in the US, which is one of the many benefits - you can use one structure for properties all over the US. There are a couple of requirements, such as using a Registered Agent, that out-of-state company owners must be mindful of. This is all the more reason to enlist the help of an attorney with experience forming Series LLCs--most of the time, that attorney can serve as your Registered Agent and address any other legal requirements specific to your situation.
Check out this article I wrote for more information that may be of use to you: https://www.biggerpockets.com/blog/cheap-free-steps-today-pro/
You can also feel free to reply with any other questions or DM me. I am happy to help!
Here's a good summary of the perceived issue from a well-respected law firm in NH.