All Forum Posts by: Ryan Seib

The main benefit I see is it makes it more difficult for anyone who may want to sue to figure out who the owner is. Generally the person who wants to sue (for whatever reason) needs to figure out who owns the property before they can file the lawsuit. They might have a hard time figuring out who owns the property if it is owned by an LLC. It might be even more difficult if the LLC is formed out of state. And once they figure out what state it is in--that state may or may not reveal who owns the property. So they would have to just sue the entity and not its owner. That means only the entity and whatever it owns (ie bank accounts, property) is at risk. It thus means the owner of the entity is not at risk because no one knows who that owner is. Indeed the entity could be owned by another entity, a trust, or multiple people. So that is the main benefit I see. It probably costs more though, when you factor in extra state costs and attorney/cpa fees to run the thing. I hope that makes sense.

You would not need to qualify. The property can be put in a trust without the lender's approval. The deed would need to be changed to acknowledge the trust as the owner of the property though. If they defaulted the trust would have the ability to cure the default or the the regular defenses under foreclosure that a homeowner would have--that does not change. They cannot pass on foreclosed property to you through the trust. The lender gets paid first no matter what. 

Just a comment. My understanding is that Belize is lightly regulated but most of the land is controlled tightly by nationals. And, if you attempt to utilize the land and are not a favored national, they will find ways to make things very difficult for you. So, the land very well could be worth not much at all depending on some of those factors.

I am not sure but I think Tristan Pettit handles that stuff as well. He is better known as the landlord guru though and puts together a lot of the forms for wilegalblank.com. 

https://petriepettit.com/people/tristan-r-pettit

Below are the relevant rules. First I have posted the penalty statute. Notice it covers instances of a nonlicensee 'acting' as a 'broker or salesperson'. Next is the definitions of 'brokers' and salespersons'. If what you do falls within one of those definitions then the WI Real Estate Examining Board has authority and may try to sue you, or the district attorney may sue you both civilly and criminally. Not good. I have bolded and underlined the portions relevant to wholesalers for your convenience. 

452.17 452.17  Penalties.

(1)Any person who engages in or follows the business or occupation of, or advertises or holds himself or herself out as or acts temporarily or otherwise as a broker or salesperson in this state without a license under this chapter shall be prosecuted by the district attorney in the county where the violation occurs or by the attorney general and may be fined not more than $1,000 or imprisoned not more than 6 months or both.

452.01 Definitions.

(2)“Broker" means any person not excluded by sub. (3), who does any of the following:

(a) For another person, and for commission, money, or other thing of value, negotiates or offers or attempts to negotiate, whether directly or indirectly, a sale, exchange, purchase, or rental of, or the granting or acceptance of an option to sell, exchange, purchase, or rent, an interest or estate in real estate, a time share, or a business or its goodwill, inventory, or fixtures, whether or not the business includes real property.

(b) Is engaged wholly or in part in the business of selling or exchanging interests or estates in real estate or businesses, including businesses' goodwill, inventory, or fixtures, whether or not the business includes real property, to the extent that a pattern of sales or exchanges is established, whether or not the person owns the real estate or businesses. Five sales or exchanges in one year or 10 sales or exchanges in 5 years is presumptive evidence of a pattern of sales or exchanges.

(bm) For another person, and for commission, money, or other thing of value shows real estate or a business or its inventory or fixtures, whether or not the business includes real property, except that this paragraph does not include showing a property that is offered exclusively for rent.

(c) For another person, and for commission, money, or other thing of value, promotes the sale, exchange, purchase, option, rental, or leasing of real estate, a time share, or a business or its goodwill, inventory, or fixtures, whether or not the business includes real property. This paragraph does not apply to a person who only publishes or disseminates verbatim information provided by another person.

(d) Issues a written report of property value that is prepared for another person and that is not an appraisal, as defined in s. 458.01 (1).

(3)“Broker" does not include any of the following:

(a) Receivers, trustees, personal representatives, guardians, or other persons appointed by or acting under the judgment or order of any court.

(b) Public officers while performing their official duties.

(c) Any bank, trust company, savings bank, savings and loan association, insurance company, or any land mortgage or farm loan association organized under the laws of this state or of the United States, when engaged in the transaction of business within the scope of its corporate powers as provided by law.

(d) Employees of persons enumerated in pars. (a) to (c), (f), and (i) when engaged in the specific performance of their duties as such employees.

(dm) Any employee of an attorney under par. (h) if all of the following are true:

1. The employee's activities are directly supportive of the attorney's provision of legal services to the attorney's client.

2. The employee's activities are activities that the attorney may perform under par. (h).

3. The employee is under the direction and supervision of the attorney.

(e) Any custodian, janitor, employee or agent of the owner or manager of a residential building who exhibits a residential unit therein to prospective tenants, accepts applications for leases and furnishes such prospective tenants with information relative to the rental of such unit, terms and conditions of leases required by the owner or manager, and similar information.

(f) Any credit union which negotiates loans secured by real estate mortgages or any licensee under ch. 138 which negotiates loans secured by real estate mortgages or any licensed attorney who, incidental to the general practice of law, negotiates or offers or attempts to negotiate a loan, secured or to be secured by mortgage or other transfer of or encumbrance on real estate.

(g) A person licensed as a mortgage banker under s. 224.72 who does not engage in activities described under sub. (2).

(h) Attorneys licensed to practice in this state while acting within the scope of their attorney's license.

452.01(3)(i)(i) A developer, as defined in s. 707.02 (11), negotiating a transaction involving a time share.

(7)“Salesperson" means any individual who is associated with a firm, other than a broker or an individual who is not required to hold a license under this chapter as provided under s. 452.03 (2).

So as you see the problems mainly arise around a pattern of activity and doing things 'for another person'. Also note that while the above statutes are pertinent, there are also consumer protection statutes and contract related issues that could come up that the district attorney, REEB, brokerages, or the investor/consumer buying the wholesaled property could use to legally go after a wholesaler.

I would add that from my perspective, I would probably have considered in this case just ignoring the letter for a period of time to see if they were serious. Especially when a letter does not contain an immediate threat of litigation, I see not pressing reason to be reactive about it. When you contact insurance right away they may overreact themselves, or they may raise rates when they put this potential claim in your claims history. Whereas I have seen many many of these kinds of threat letters simply fizzle out. Or, if not than at least you have forced them to make more defininte claims and threats in a second letter. Of course, it may be harder to wait on it and not know what is happening. But patience often rewards one it seems. 

On the other hand perhaps your insurance preferred to be contacted immediately rather than later on. I will admit that some attorneys might send one letter and the second one is not delivered or they do not bother before suing. It is a slight risk that they would just sue and then a permanent court record is created. Of course insurance still has a duty to defend in most states is my understanding. And I doubt any policies say they do not have to defend or allow the claim just because you do not notify them immediately of a threatened action. But that would be something to check into for future events like this one, imo. Good luck with this and hopefully nothing comes of it.

Correct Mr. Blyton, that is how it usually works, and in other states where the series llc is provided for by law. You can certainly do what you propose above, in Wisconsin. Just keep in mind that liability protection likely lumps together all the series if you get sued. So if you lose a lawsuit the entire series LLC and everything underneath it is liable to pay the judgment not just the single property in one of the child entities. By the way, technically you could also open a separate LLC for each property and still only use one checking account and registered agent. The RA probably charges separate fees for each I suppose, though a RA just needs to be an address. I know you are not supposed to do this but I have seen the RA set up as a PO box as well. But anyways, the drawback to having one checking account is separating the funds if there is a judgment. And that is assuming the court does not just look at all the entities sharing 1 checking account as, essentially therefore, 1 entity (which is the same problem you have with a Wisconsin series LLC under our truncated WI statute on them). I apologize if the above does not make sense in any way. Happy to clarify if so.

Yes. Best wishes in doing so Rachel.

The WI statutes do not allow the concept of series LLC as we know them. I pasted the statute below, and the Delaware statute beneath it for contrast. Much is left out of Wisconsin. For one, it does not allow for liability protection between the different child entities.

Not to say such protection is not 'possible' in some sense should it be taken to court. But it is certainly unlikely. Courts are not really supposed to make up things in the statutes that are not explicitly there already. Notice also the statute says the operating agreement is what provides for the series, not law or other government sanction. I am addressing the statute is because it is the only information available. There is no case law in Wisconsin on that statute or on the series LLC.

So, based on the statutory language it seems clear that limited liability between child LLCs would not be allowed (which is the main reason to use them). Now what about forming a series LLC in another state and using the series to own property in Wisconsin? This is possible and has been done often. Forming a Delaware Series would be fine for example. And each child can own a property in Wisconsin. The liability protection should extend back to the series allowances in Delaware, if any lawsuit is brought in Delaware or brought using Delaware law.

But, each Delaware child LLC would probably need to register separately in Wisconsin (depends on what the LLC is doing). And pay separate fees as a foreign entity. And each such registration then becomes discoverable through the normal processes in Wisconsin. Also, if lawsuits are brought in Wisconsin (which they almost certainly would be) then the Delaware liability protections would probably not apply. Best practice would be to enter all contracts with a choice of law provision. Thus you could use another state's series LLC to do things in Wisconsin. There are benefits. So I would say consider it. There are a lot of other considerations too such as the complexity of the operations of the series LLC vs separate LLCs, the maintenance cost differential between those choices, and how they fit with one's business goals.

WISCONSIN

183.0504 183.0504  Series of members, managers, or limited liability company interests.An operating agreement may establish, or provide for the establishment of, designated series or classes of members, managers, or limited liability company interests that have separate or different preferences, limitations, rights, or duties, with respect to profits, losses, distributions, voting, property, or other incidents associated with the limited liability company.

DELAWARE

§ 18-215 Series of members, managers, limited liability company interests or assets [Effective until Aug. 1, 2019]

(a) A limited liability company agreement may establish or provide for the establishment of 1 or more designated series of members, managers, limited liability company interests or assets. Any such series may have separate rights, powers or duties with respect to specified property or obligations of the limited liability company or profits and losses associated with specified property or obligations, and any such series may have a separate business purpose or investment objective.

(b) Notwithstanding anything to the contrary set forth in this chapter or under other applicable law, in the event that a limited liability company agreement establishes or provides for the establishment of 1 or more series, and if the records maintained for any such series account for the assets associated with such series separately from the other assets of the limited liability company, or any other series thereof, and if the limited liability company agreement so provides, and if notice of the limitation on liabilities of a series as referenced in this subsection is set forth in the certificate of formation of the limited liability company, then the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a particular series shall be enforceable against the assets of such series only, and not against the assets of the limited liability company generally or any other series thereof, and, unless otherwise provided in the limited liability company agreement, none of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of such series. Neither the preceding sentence nor any provision pursuant thereto in a limited liability company agreement or certificate of formation shall (i) restrict a series or limited liability company on behalf of a series from agreeing in the limited liability company agreement or otherwise that any or all of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the limited liability company generally or any other series thereof shall be enforceable against the assets of such series or (ii) restrict a limited liability company from agreeing in the limited liability company agreement or otherwise that any or all of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to a series shall be enforceable against the assets of the limited liability company generally. Assets associated with a series may be held directly or indirectly, including in the name of such series, in the name of the limited liability company, through a nominee or otherwise. Records maintained for a series that reasonably identify its assets, including by specific listing, category, type, quantity, computational or allocational formula or procedure (including a percentage or share of any asset or assets) or by any other method where the identity of such assets is objectively determinable, will be deemed to account for the assets associated with such series separately from the other assets of the limited liability company, or any other series thereof. Notice in a certificate of formation of the limitation on liabilities of a series as referenced in this subsection shall be sufficient for all purposes of this subsection whether or not the limited liability company has established any series when such notice is included in the certificate of formation, and there shall be no requirement that any specific series of the limited liability company be referenced in such notice. The fact that a certificate of formation that contains the foregoing notice of the limitation on liabilities of a series is on file in the office of the Secretary of State shall constitute notice of such limitation on liabilities of a series. As used in this chapter, a reference to assets of a series includes assets associated with a series and a reference to assets associated with a series includes assets of a series.

(c) A series established in accordance with subsection (b) of this section may carry on any lawful business, purpose or activity, whether or not for profit, with the exception of the business of banking as defined in § 126 of Title 8. Unless otherwise provided in a limited liability company agreement, a series established in accordance with subsection (b) of this section shall have the power and capacity to, in its own name, contract, hold title to assets (including real, personal and intangible property), grant liens and security interests, and sue and be sued.

(d) Notwithstanding § 18-303(a) of this title, under a limited liability company agreement or under another agreement, a member or manager may agree to be obligated personally for any or all of the debts, obligations and liabilities of one or more series.

(e) A limited liability company agreement may provide for classes or groups of members or managers associated with a series having such relative rights, powers and duties as the limited liability company agreement may provide, and may make provision for the future creation in the manner provided in the limited liability company agreement of additional classes or groups of members or managers associated with the series having such relative rights, powers and duties as may from time to time be established, including rights, powers and duties senior to existing classes and groups of members or managers associated with the series. A limited liability company agreement may provide for the taking of an action, including the amendment of the limited liability company agreement, without the vote or approval of any member or manager or class or group of members or managers, including an action to create under the provisions of the limited liability company agreement a class or group of the series of limited liability company interests that was not previously outstanding. A limited liability company agreement may provide that any member or class or group of members associated with a series shall have no voting rights.

(f) A limited liability company agreement may grant to all or certain identified members or managers or a specified class or group of the members or managers associated with a series the right to vote separately or with all or any class or group of the members or managers associated with the series, on any matter. Voting by members or managers associated with a series may be on a per capita, number, financial interest, class, group or any other basis.

(g) Unless otherwise provided in a limited liability company agreement, the management of a series shall be vested in the members associated with such series in proportion to the then current percentage or other interest of members in the profits of the series owned by all of the members associated with such series, the decision of members owning more than 50 percent of the said percentage or other interest in the profits controlling; provided, however, that if a limited liability company agreement provides for the management of the series, in whole or in part, by a manager, the management of the series, to the extent so provided, shall be vested in the manager who shall be chosen in the manner provided in the limited liability company agreement. The manager of the series shall also hold the offices and have the responsibilities accorded to the manager as set forth in a limited liability company agreement. A series may have more than 1 manager. Subject to § 18-602 of this title, a manager shall cease to be a manager with respect to a series as provided in a limited liability company agreement. Except as otherwise provided in a limited liability company agreement, any event under this chapter or in a limited liability company agreement that causes a manager to cease to be a manager with respect to a series shall not, in itself, cause such manager to cease to be a manager of the limited liability company or with respect to any other series thereof.

(h) Notwithstanding § 18-606 of this title, but subject to subsections (i) and (l) of this section, and unless otherwise provided in a limited liability company agreement, at the time a member associated with a series that has been established in accordance with subsection (b) of this section becomes entitled to receive a distribution with respect to such series, the member has the status of, and is entitled to all remedies available to, a creditor of the series, with respect to the distribution. A limited liability company agreement may provide for the establishment of a record date with respect to allocations and distributions with respect to a series.

(i) Notwithstanding § 18-607(a) of this title, a limited liability company may make a distribution with respect to a series that has been established in accordance with subsection (b) of this section. A limited liability company shall not make a distribution with respect to a series that has been established in accordance with subsection (b) of this section to a member to the extent that at the time of the distribution, after giving effect to the distribution, all liabilities of such series, other than liabilities to members on account of their limited liability company interests with respect to such series and liabilities for which the recourse of creditors is limited to specified property of such series, exceed the fair value of the assets associated with such series, except that the fair value of property of the series that is subject to a liability for which the recourse of creditors is limited shall be included in the assets associated with such series only to the extent that the fair value of that property exceeds that liability. For purposes of the immediately preceding sentence, the term "distribution'' shall not include amounts constituting reasonable compensation for present or past services or reasonable payments made in the ordinary course of business pursuant to a bona fide retirement plan or other benefits program. A member who receives a distribution in violation of this subsection, and who knew at the time of the distribution that the distribution violated this subsection, shall be liable to a series for the amount of the distribution. A member who receives a distribution in violation of this subsection, and who did not know at the time of the distribution that the distribution violated this subsection, shall not be liable for the amount of the distribution. Subject to § 18-607(c) of this title, which shall apply to any distribution made with respect to a series under this subsection, this subsection shall not affect any obligation or liability of a member under an agreement or other applicable law for the amount of a distribution.

(j) Unless otherwise provided in the limited liability company agreement, a member shall cease to be associated with a series and to have the power to exercise any rights or powers of a member with respect to such series upon the assignment of all of the member's limited liability company interest with respect to such series. Except as otherwise provided in a limited liability company agreement, any event under this chapter or a limited liability company agreement that causes a member to cease to be associated with a series shall not, in itself, cause such member to cease to be associated with any other series or terminate the continued membership of a member in the limited liability company or cause the termination of the series, regardless of whether such member was the last remaining member associated with such series.

(k) Subject to § 18-801 of this title, except to the extent otherwise provided in the limited liability company agreement, a series may be terminated and its affairs wound up without causing the dissolution of the limited liability company. The termination of a series established in accordance with subsection (b) of this section shall not affect the limitation on liabilities of such series provided by subsection (b) of this section. A series is terminated and its affairs shall be wound up upon the dissolution of the limited liability company under § 18-801 of this title or otherwise upon the first to occur of the following:

(1) At the time specified in the limited liability company agreement;

(2) Upon the happening of events specified in the limited liability company agreement;

(3) Unless otherwise provided in the limited liability company agreement, upon the vote or consent of members associated with such series who own more than 2/3 of the then-current percentage or other interest in the profits of the series of the limited liability company owned by all of the members associated with such series; or

(4) The termination of such series under subsection (m) of this section.

Unless otherwise provided in a limited liability company agreement, a limited liability company whose original certificate of formation was filed with the Secretary of State and effective on or prior to July 31, 2015, shall continue to be governed by paragraph (k)(3) of this section as in effect on July 31, 2015 (except that "affirmative'' and "written'' shall be deleted from such paragraph (k)(3) of this section).

(l ) Notwithstanding § 18-803(a) of this title, unless otherwise provided in the limited liability company agreement, a manager associated with a series who has not wrongfully terminated the series or, if none, the members associated with the series or a person approved by the members associated with the series, in either case, by members who own more than 50 percent of the then current percentage or other interest in the profits of the series owned by all of the members associated with the series, may wind up the affairs of the series; but, if the series has been established in accordance with subsection (b) of this section, the Court of Chancery, upon cause shown, may wind up the affairs of the series upon application of any member or manager associated with the series, or the member's personal representative or assignee, and in connection therewith, may appoint a liquidating trustee. The persons winding up the affairs of a series may, in the name of the limited liability company and for and on behalf of the limited liability company and such series, take all actions with respect to the series as are permitted under 18-803(b) of this title. The persons winding up the affairs of a series shall provide for the claims and obligations of the series and distribute the assets of the series as provided in 18-804 of this title, which section shall apply to the winding up and distribution of assets of a series. Actions taken in accordance with this subsection shall not affect the liability of members and shall not impose liability on a liquidating trustee. Unless otherwise provided in a limited liability company agreement, a limited liability company whose original certificate of formation was filed with the Secretary of State and effective on or prior to July 31, 2015, shall continue to be governed by the first sentence of this subsection as in effect on July 31, 2015.

(m) On application by or for a member or manager associated with a series established in accordance with subsection (b) of this section, the Court of Chancery may decree termination of such series whenever it is not reasonably practicable to carry on the business of the series in conformity with a limited liability company agreement.

(n) If a foreign limited liability company that is registering to do business in the State of Delaware in accordance with § 18-902 of this title is governed by a limited liability company agreement that establishes or provides for the establishment of designated series of members, managers, limited liability company interests or assets having separate rights, powers or duties with respect to specified property or obligations of the foreign limited liability company or profits and losses associated with specified property or obligations, that fact shall be so stated on the application for registration as a foreign limited liability company. In addition, the foreign limited liability company shall state on such application whether the debts, liabilities and obligations incurred, contracted for or otherwise existing with respect to a particular series, if any, shall be enforceable against the assets of such series only, and not against the assets of the foreign limited liability company generally or any other series thereof, and whether any of the debts, liabilities, obligations and expenses incurred, contracted for or otherwise existing with respect to the foreign limited liability company generally or any other series thereof shall be enforceable against the assets of such series.

Well he is referring to revocable trusts that fail. Irrevocable trusts can be used for asset protection if the creator of the trust has given up enough control of the assets. Notice he said most trusts fail not all.

It is true that many people do not want to give up enough control of the assets to make the trust work as asset protection. But many wealthy people are happy to because they try to retain the control other ways. Another thing wealthy people do is create foundations that they control in order to protect assets from the estate tax and creditors.

Disclaimer, I am not an estate planning attorney either. But asset protection is an important consideration of trust creation. Especially for the elderly.