What is the best way to open up an llc. How many properties do you have in one llc.
Also once the property is in the llc how would you refinance?
@Antonio Martinez hey Antonio,
I have several LLCs and I also live in CA. I started with one property per LLC but due to the ca franchise board (minimum of $800 per LLC) I change my style a bit. Now I lump numerous properties in the same geographical area into 1 LLC with high liability limits as well as an umbrella policy.
With refis, for commercial property, most lenders just simply require you to sign a personal guarantee.
Best of luck!
@Michael Albaum thanks for the response. My cpa suggested 3 per llc. So many questions when starting.
@Antonio Martinez - Every situation is different. Smart to consult with a CPA. An Attorney experienced in assect protection may be good to speak with as well.
Related to asset protection, if you're starting out and live in CA, the $800 FTB minimum is a drag (I live in CA also). When you speak with the Attorney ask for their recomendation on a scenario where asset protection comes in the form of having a large liability policy on the property(ies) and fairly high loan to value ratio. That way in the event of a lawsuit you don't have much equity to chase after and if they decide to proceed, the insurance company will take on the fight and you'll sit on the sidelines. If there's a judgement hopefully your large liability policy will cover it.
@Antonio Martinez When it comes to asset protection in CA, more often than not I will establish a DST (Delaware Statutory Trust) for my clients. As @Michael Albaum mentioned the $800 per LLC that is assessed in CA is a heavy price to pay as your properties stack up.
The DST is not obligated to pay the $800 franchise tax mentioned above, and can contain as many assets as you like. The DST is viewed as an estate planning tool, and therefore exempt from the far-reaching corporate tax laws set forth by California's FTB. A properly set-up DST will both protect your assets and bypass the burdensome franchise tax that would be levied against a Series LLC or Traditional LLC.
The Delaware Act expressly provides that “[n]o creditor of the beneficial owner shall have any right to obtain possession of, or otherwise exercise legal or equitable remedies with respect to, the property of the statutory trust.” 12 Del. C. §3805(b). The title to trust property may be vested in one or more trustees, but shall not be subject to claims against the trustee which are unrelated to the statutory trust.
More information can be found in this article I wrote for BP: https://www.biggerpockets.com/blog/california-real-estate-investors-delaware-statutory-trust/
This is not legal advice, just my opinion as a real estate investor.
If you have any questions feel free to leave a reply or DM.
@Scott Smith - Interesting article on DSTs Scott. I plan to investigate further. Thank you.
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