All Forum Posts by: Al Palomo

You’re worried about form, not substance. Specifically, ALWAYS work on providing safe conditions and law-abiding procedures. The best asset protection is not getting sued in the first place.

Then there are other considerations. A single-member LLC will give you no real protection. Why? Because you are the only one responsible for what the LLC did or didn't do, and you will be responsible for it. You can never escape liability for your own acts and omissions. Yes, failure to observe corporate formalities can lead to piercing the corporate veil, but if it was only obeying you, then you can be sued in your own right, in addition to the corporate entity.

Then there’s the question of umbrella insurance. Most umbrella policies explicitly refuse to cover business activities, whether in your own name or in a corporate form. If they are going to cover business activity, you can bet your bottom dollar that the insurer will review all of your practices and procedures in order to determine whether you are doing things safely and in a law-abiding manner (see above, first paragraph).

So yes, get plenty of insurance, and a corporate entity between you and your adoring public may be most convenient (consult your lawyer as to whether and what type). Asset protection starts with operating policies and practices and the proper execution of both. You will never, ever, achieve true, bulletproof, asset protection. Know that, and conduct yourself accordingly.

@Al Palomo

So, it looks like you've jeopardized your corporate veil by at least co-mingling funds and under capitalization.  You would have to consult a qualified attorney or two to see what is the status of your corporate veil and your risks.

Otherwise, you could do what many investors do and invest in their personal name. As you are saying, you'd have to move Title to your personal name (Title should be with the LLC right now) and get a homeowner/landlord insurance policy as well as an umbrella policy if you desire. Make sure to keep your property in good repair to limit your liability.

Hi Al, 

It depends on where your stance on having a legal separation between personal and business lies, and your future goals. 

LLCs allow you to keep your personal assets separate from your properties. Whereas an umbrella policy, though providing liability coverage, do not. 

If you are going to continue to purchase more properties and to build your portfolio, in my opinion, the LLC is the best path forward. However, if you are settling in with a few investment properties, you could go the umbrella policy route.

Hope this helps.