All Forum Posts by: Mike S.

First of all, the way your LLC is managed has nothing to do with the way it is taxed:

Single Member LLC (either member managed or manager managed) can be taxed as disregarded entity, C corp or S corp.

Multi Members LLC (member managed or manager managed) can be taxed as partnership, C corp or S corp.

The way the LLCs are taxed is an election you make with the IRS. If you don't make that election, it will default to disregarded entity for single member LLC and partnership for multi member LLC.

as @Frank Chin wrote, usually the purpose of a management structure is to maximize fringe benefits (like reimbursement of health expense, contribution to retirement accounts, etc...) and to maximize pre-tax deductible expenses. It is usually best achieved with a C-corp. To avoid double taxation and the conversion of passive income to active income, these entities often makes very little money. They collect just enough management fee to keep the net income low. The bulk of the income of the properties are going directly to the owners of the properties: the management entity collect all the rents but pay back the owner and issue a 1099-MISC. These rents collected are not considered income for the management entity, only the management fee are

The second issue that you mentioned was the need for a license to manage properties. I don't know which state you are operating in, but in FL you don't need a license if you manage your own property. Depending on the state, there could be different way of interpreting ownership. Does it mean that the property needs to be under the name of the manager? Does it mean that the manager has some beneficial ownership of the property? Does it mean that the beneficial owner of the managing entity is also a beneficial owner of the property?

In my case, all my properties are owned by different single member disregarded LLCs. All of these LLCs are owned by a WY multi members holding LLC.

My management entity is a C corp, that is also a minority member of the WY LLC. As such the C Corp 'owns' a piece of the properties that it manages.

The property owners (LLCs) signed a management contract with the C-corp to act as manager.

Do a warranty deed of the property to a land trust where you are the initial beneficiary, then later assign the beneficial interest of the land trust to your LLC. Don't forget to change also the name insured to your land trust. The first transfer will protect you against a due on sale clause (Garn St Germain Act). The assignment to the LLC being a private non recorded document, no one will know about it.

Any other input?

Yes, my understanding is also that your LLC will have to sue you. You in return will go to your title company to settle it. Your LLC by itself won't have the insurance directly (except for some title insurance that allows the transfer of the insurance to entities as long as the beneficial owner is the same).

If you used a quit claim deed instead, your LLC would have had no recourse at all.

My layman understanding (ie I'm not a lawyer and you should consult with one for any legal decision) is:

If you transfer your property to your LLC, you need to get consideration for it (ie share, beneficial interest, etc...)

Then you need to manage your LLC as a business separate from you (no commingling of asset, proper documentation of meeting, proper administrative chores, etc...) as failure to do so will probably pierce its veil of protection.

Except for that, unless your transfer is reversed for other consideration (like fraudulent transfer to avoid an existing creditor), your LLC should provide you the inside and outside liability offered by the LLC in your State.

The registration usually contains the place of business of the LLC, the address of the registered agent, the name and address of the manager and/or members.

You can always amend the information either during the yearly renewal or by paying an supplemental filing. However, all the prior registrations will be available forever for all to see.

 Sure.

Most of my companies are either at USPS PO box with street address or virtual office for the members if needed. However all of them use the registered agent address for filing as address of business as you can't use a po box with most state.

It all depend what each LLC is doing.

If LLC B owns property in State and receive rent in state B, it only needs to be registered in state B.

If LLC A is just a holding, not doing business in state B, but just owning LLC B, it does not have to be registered in state B.

The concept of using a holding LLC is multiple.

First as you described, if state B does not give you anonymity, you can get the anonymity of state A by having LLC A listed as sole member of LLC B.

Also, and it is probably the most important point, if state B does not have good charging order protection for their LLC, you can get the excellent charging order protection of state A protecting your LLC B for outside liability.

Delaware and Wyoming are two very good state to get your holding LLC in.

First of all, do not quit claim but use a warranty deed instead to avoid loosing your title insurance.

Second, deed your property into a land trust where you are the initial beneficiary. The Garn St Germain Act will protect you against any due on sale clause. Change your name insured to the land trust.

Later you will assign the beneficial interest of the land trust to your LLC. This assignment being private and not recorded, the bank won't know about it.