Baltimore: Umbrella or LLC?

7 Replies | Baltimore, Maryland

I have a four duplexes in Baltimore, and I am not sure which strategy is best for liability protection: 1) create an LLC, but transfer taxes are pretty prohibities, 2) have an umbrella policy ($1M? $2M?), or 3) a combination of both.

I would appreciate any insight, advice or thoughts.

Thank you,

Tarik Nabi

A umbrella policy will be inexpensive for that amount. The good thing about setting up and LLC would be the added benefits of it. However, day you set up an LLC then have a large lawsuit you could potentially loose everything in the llc. I would at least start with umbrella and then work toward both.

If you want the best protection, do both. An LLC does not provide as much protection as people think, however I don't know a lawyer that would own property without one.

The only time an LLC will not provide liability protection is when you mismanage it (even as a single member) and that applies to any other entity. The whole purpose of a LLC is to limit your liability, as it is disregarded for tax purposes. Many will try to scare you by telling you that you can lose other properties in it if you get sued, which may be true, but then the real concern should be, what are you doing that someone can sue you and win? I've never heard of a business getting sued and losing everything from one lawsuit. Do mismanaged it, keep clear distinction between what's personal and what's the LLC's and don't do shady business.

Thanks for the input. I'm not doing anything shady, but if someone gets hurt on my property, or if they sue for lead poisoning (even though all the properties are lead certified), then I might have a problem, no? What do you think?

I don't use LLC anymore - if you are concerned about protecting yourself from liability loss -

  • get enough insurance
  • treat your tenants like customers
  • pay attention to the condition of the units
  • always select the best tenants
  • Be kind and personable with you tenants
  • provide great service and communication
  • pay attention to the exterior of the property
  • keep the grounds clean
  • act as a professional - be kind to your customers (tenants) 
  • have some empathy for your tenants with they have a problem paying rent.
  • work with your tenants