All Forum Posts by: Mike S.

Look at your operating agreement. It should detail the procedure for a member to leave.

Also, if you want to cut all ties with the prior property you flip to avoid later possible lawsuit, it may be better to dissolve the company and open another one for the new deal.

Or you can also, instead of selling the property, sell the LLC with the property inside. In some state that would avoid the tax reassesment, the transfer doc and stamps and the deed. It may be advantagous for the new owner.

Originally posted by @Costin I.:

@Brandon Reda And if you do flipping, you might want to make the LLC dormant

Costin, why would you want to make your LLC dormant? Wouldn't it be better to just dissolve it after the flip. Then there is no one to come back after in case of law suit years later.

Don't forget also to replace the corrosion rod every five to ten years years to extend the life of your water heater.

Originally posted by @George Skidis:

Your best course of action is to own nothing in your own name. Set up a land trust for your personal residence and pay rent to the trust for the privilege of living there. Use that rent to cover the mortgage, real estate taxes, insurance and maintenance.

It would not be appropriate in most state to put your personal residence in a land trusts as you could be losing your homestead protection and also may be loosing some property tax cap limit on homestead residence.

I do however agree on the land trust strategy for all other real estate property that you own. However, in most state (except Florida), land trust is not an asset protection tool but only an anonymity tool. It is also a good way to avoid the due on sale clause accelerating a mortgage. If you couple the land trust with an LLC as the beneficiary you get the best of both world: asset protection and anonymity.

Originally posted by @John Thedford:

Lots of people talk about privacy, but in a court of law you can be compelled to list all of your assets (like it or not).

Maybe I am wrong, but my understanding is that you can not be compelled to list all your asset until after you have lost the law suit. I don't believe that you could be compelled to it during the discovery part unless in very specific instances.

The anonymity is not an asset protection technic per se, but is a smoke screen that will avoid ambulance chaser or opportunistic lawsuit based on contingency. It can also helps during a settlement negotiation, as the other party will have more difficulties estimating your net worth.

You can get privacy in a Florida LLC if you register the member/manager as another anonymous LLC (like WY, NV, NM LLCs).

For asset protection purposes, Florida multi member LLCs have good charging order protection. Single member are not so lucky (Olmstead vs FTC case), and it would be advisable to have single member Florida LLC owned by a WY or NV holding LLC to gain this outside protection.

When you create an LLC, basically you are creating a box. If something inside the box creates liability, you can loose the whole box content, but nothing outside the box.

If you are sued personnaly, you can loose all the asset that you own, but not what is in the box (if the State where you organized your LLC offer the charging order as only remedy).

The gold standard in asset protection is to put each dangerous asset (ie the one that gives you liability; real estate being a good example of it) in its own box, while you can put all the non dangerous assets (bank and brokerage accounts) in another single box.

In practice, you will have to decide what is the size of the box that you would accept to loose vs the price of establishing and maintening these box. Some will tell you that they don't need an LLC, some will tell you that they would need one per property. What you need, only you can tell. It's what will make you feel better at night based on your specific circumstances.
Even when using this structuring strategy to the fullest extend, liability insurance is a must but not a replacement.

@Brandon Reda The internal protection of LLC is the same in all states and does not differ from single to multi member llc. The outside protection however is different in each state. In Florida the charging order was the sole remedy for both single and multi members llc until that famous Olmsted vs FTC case that removed that protection for single member LLC. The way to get around it is to have the single member LLC owned by a WY or NV LLC that will give you that outside charging order protection. In your case, I don’t know what Illinois LLC outside protection strengths are. If they are not strong, i would suggest to look at the same strategy of WY or NV holding LLC.

@Noah M. I had them involved at one time in a part of my structure. But I am pretty much in line with the majority of their standard setup. I have also an offshore entity for some international investments but Anderson is not involved in any offshore structure. The management company is just contracted by eqch properties llc to act as the property manager for them. The whole setup is probably a little bit heavy for my current situation but offers the flexibility I was looking for my futur projects. And i don’t mind the minutia of the corporate and companies paperwork, probably part of my OCD side :-)

Originally posted by @Anthony Wick:

@Brian Barfoot I can access my Brokerage account and have money within 2-3 days. When has anybody ever needed a large sum of money before 48 hours? Bail money? Credit cards could actually work if you were desperate for a couple days. My money is working for me, and not just in real estate. Are stocks risky? Of course. But not since 1929 has anybody lost that much money in one day that you have to worry.

The problem is that when you would need the money, it will be when the market just took a 15% dip and you won't be able to wait for it to go back up.

In my view anything that you can't keep for more than three years, should not be in stock.

All short term (less than 3 years) liquidities are back in my HELOC. That's much less % to pay that the few cents that I could get in a savings or money market account.