All Forum Posts by: Mike S.

The whole concept of using LLC for asset protection is to insulate each property in its own box. If something happens inside the box, the maximum that can be taken away is the content of the box.

How much you want to put in each box is your decision alone. How much would you accept to lose?

Some people here will argue that you don't need an LLC and that a liability insurance will be enough. It could be for them, but not for you. Everyone has its own asset to protect and its own risk assessment to make. What you are trying to protect is not only the property but ALL your assets.

Even with a low equity asset like a highly mortgaged single family home that is only 25k, if you get a judgment above your umbrella limit , you may loose your home (for the portion not homestead protected by your state), your brokerage account, your other properties, etc...

By putting this asset in the LLC, and if you maintain it properly, you can only loose that 25k from inside liability, or if it is an outside claim this 25k will be protected.

Due to the cost of establishing, maintaining and additional running cost (loan, insurance, etc..) you will have to determine how much  you are willing to risk.

LLC does not replace liability or umbrella insurance, it is just another tool in your asset protection strategy. You may need neither of them, one of them or both.

Also, you may think that you can put all your properties in one LLC because the equity is low now. What will it be in a few years? Do you expect to refinance? Or would it be a buy and hold property? Using the wrong strategy now may cost you more money later to adapt the structure.

Educate yourself on the different asset protection tools and when you start getting a first draft of your plan, get a consultation with a reputable asset protection lawyer from a firm that deals with real estate.

In general is better to open an LLC in the State where your property is located. There are some exceptions to it.

The LLC has to objectives: to protect you from inside liability (you can loose everything inside your property, but it won't reach your own assets out of the LLC).

to protect you from outside liability. If one of your patient sues you, he will only be able to get a charging order against your LLC that will in practice won't let him get anything if you don't distribute any money out of it.

The first protection is the same in all states. However, the outside protection varies depending on the state. Only a few states have the charging order as sole remedy, while other will let your creditor foreclose your LLC. If the state where your property is has good protecting statute, then just open the LLC there. If not, you would probably need to have this LLC owned by an out of state holding LLC where the state statutes are more protective.

Creating an LLC could be fast and only taking a few business days. You can also get your EIN imediatly online when the IRS website does not crash like it did for one my LLC and I had then to revert to fax and wait 2 weeks for the fax back. However getting a bank account could be an ordeal with certain banks and take over two weeks for their compliance Dept to approve it. Last, if your lender is ok with it, it would be better to buy your property dIrectly under the LLC name. But you would then need to sign the offer under this name. For all these reasons, I would probably create the LLC well in advance. You can always wait later to create a specific operating agreement that would match your need, but at least the entity would be ready.

Originally posted by @Max T.:

Originally posted by @Mike S.:

Originally posted by @Max T.:

I wasted money on this "service" for years before officially changing it to myself. Whew!

 If you are able to receive service at your address during business hours, 5 days a week then sure its cheaper. However, for most of us, we don't have staff manning the address and you definitely don't want to put your home address either for privacy and safety reasons..

 I have a mailbox.

And I'm not scared of people knowing my address.

But to each his own...

 In most State a mailbox would not be enough as you need a person to receive service of legal documents..

Originally posted by @Max T.:

I wasted money on this "service" for years before officially changing it to myself. Whew!

 If you are able to receive service at your address during business hours, 5 days a week then sure its cheaper. However, for most of us, we don't have staff manning the address and you definitely don't want to put your home address either for privacy and safety reasons..

For privacy, you name will still be listed in the member/manager section unless your LLC is in one of the anonymous state (WY, NV, NM...).

There are many registered agent company, and they almost all providing the same service. Some will also, for an additional cost, do remailing and let you use that address as principal office.

The average cost for a basic registered agent is usually between $45 and $100/year. Just shop around and look for the best price. I am not convinced that there is any difference in quality between providers for the basic service that they offer.

A grantor living trust is for estate planning. You are the grantor, the trustee and the initial beneficiary. At your death, you have a successor trustee(s) and successor beneficiary(ies). Basically, while you are alive, you are still doing everything you want with your property. However, at your death, you avoid probate completely.

A land trust is a different kind of trust, and for these ones, you want a different trustee (for anonymity on the property records and also to avoid the risk of voiding the trust), and usually your beneficiary would be an LLC. I never opened any bank account directly for them, but for the LLC.

There is also, for estate planning, the Lady Bird deed, that also avoids probate on your homestead property, but avoids too in some states some detrimental side effects for Medicare of the living trust.

Originally posted by @Brian Dickerson:

So with I originally got the insurance policy in my own name, then transfer the title of the property to the LLC...do I have to add the LLC to the insurance policy to make it legit?

Yes, you need to put the LLC as named insured, and yourself as additional insured.

I'll try to give you an average cost for an LLC:

Registration with the state: between $50 and $800 depending on the State

Operating agreement creation: from $0 up to around $1000 if you use a lawyer.

Maintenance:

State renewal: between $0 and $800/year depending on the State

Registered agent: $50 to $150/year

As explained above, it is usually better to have the LLCs owning the properties in the same state than the properties.

However be careful with single member LLC in Florida (see the Olmstead v. Federal Trade Commission case). You won't get the charging order as exclusive remedy for outside protection.

Look into having your single member FL LLCs owned by a WY holding LLC to keep that outside protection.