Updated about 11 years ago on . Most recent reply
Business entities and insurance
I had just finished reading a post that was linked to the ultimate guide to real estate investing ( http://www.biggerpockets.com/renewsblog/2009/03/18... ). The post talked about how you should have a business entity (lets say an LLC) and also insurance to protect your personnel assets from any claims resulting from a mishap at one of your properties.
Lets create a fact pattern, bare with me. John owns an LLC with 4 properties (properties A, B, C, and D) under the LLCs name. John has the proper insurances and the LLC was properly formed with all the correct paperwork. A railing on the stairs breaks in property-A. Tenant-Jill files a lawsuit against the company because the broken railing caused Tenant-Jill to break her arm. The claim ends up exceeding the insurance coverage.
My questions are:
1. Are properties B, C, and D at risk because of Tenant-Jills claim?
2. If they are at risk, is it viable to make multiple LLCs to separate your assets? For example; have properties A and B under LLC-1 and properties C and D under LLC-2.
Any help is greatly appreciated! Thanks in advance.