All Forum Posts by: Savannah Wallace

Operating a sober living home is a great way not only to generate income for yourself but to provide stability and security for individuals who may be going through a vulnerable time in their lives.

Connecting with the National Alliance for Recovery Residences (NARR) is a good start. I’d also recommend finding local nonprofits that may be providing this service. Additionally, identifying local nonprofit organizations engaged in this activity may provide you with a connection as well. Many clients I assist establish nonprofits for this specific purpose, yet frequently encounter difficulties in securing suitable housing or face budgetary constraints in purchasing property, often opting to lease instead.

You’ll want to ensure that whoever you end up leasing to has house rules drafted and requires each resident to comply with them. These rules are there not only to protect the residents and assist them on their road to recovery, but also to make sure that your house is maintained.

Good luck! 

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

Utilizing land trusts can offer distinct advantages and are often used in conjunction with LLCs to optimize asset protection and privacy.

Due-on-sale clauses in some mortgage agreements can be triggered when a property is transferred. Transferring property into a revocable grantor trust, which a land trust is, is exempt from triggering the due-on-sale clause under the Garn-St. Germain Act. Depending on the loan that you may have it may have been recommended that you utilize a land trust to transfer the property to the LLC if you closed in your name.

Land trusts offer anonymity as they are generally not filed publicly. This removes your name from public records, making it difficult to connect the property to you and your LLC.

While land trusts offer privacy and can help avoid due-on-sale clauses, they typically don't provide robust asset protection. Combining a land trust with an LLC can create a comprehensive strategy for both privacy and asset protection. To connect the two entities you'll assign the beneficial interest to the LLC. The lease agreement for the property is between the tenants and the land trust. Despite the lease being with the land trust, the LLC, as the beneficial owner, can still collect rents and manage the property.

Many of my clients utilize this strategy to enhance anonymity and overall asset protection.

Note: This information is for educational and informational purposes only and does not constitute legal, tax, or financial advice. No attorney-client, fiduciary, or professional relationship is established through this communication.

1. I recommend working with a professional to set up your LLC rather than doing it yourself. As previously mentioned, forming your own entity can create anonymity issues, which may weaken the asset protection benefits of an LLC. When forming an LLC, you are typically required to list an organizer and, depending on the state, possibly managers as well. If you hold all these positions and this information is publicly available on the Secretary of State's website, it becomes easier to connect you to the LLC and its assets.

Many professionals offer services that allow you to use their office as the business address, which helps protect your privacy by avoiding the use of your home address in public filings.

Additionally, a robust Operating Agreement (OA) is essential. This document should clearly establish that the LLC is a separate legal entity and not merely an extension of yourself. The OA should include items such as:

• 1. Roles and responsibilities of managers/members
• 2. Procedures for removing or replacing members
• 3. Guidelines for dissolving the LLC
• 4. Clauses addressing contributions and distributions

To maintain the corporate veil, ensure compliance measures are followed, such as opening a separate bank account for the LLC and avoiding commingling funds.

2. It’s recommended to establish the LLC in the state where the property is located. Most states require you to register in-state to conduct business there. Additionally, if your LLC needs to engage in legal action—such as enforcing a contract—you will likely need to be registered in that state to proceed with litigation.

3. If you live in a community property state, then the LLC can be set up as disregarded, otherwise the LLC would be taxed as a partnership. Apart from a well drafted operating agreement and not utilizing your personal information on the filing, you’ll need to make sure to open a separate bank account for this LLC. Be aware of state annual filings such as annual reports and possible franchise taxes. A partnership will also need to file a tax return by March 15th of every year. While LLCs are not statutorily required to have meetings like corporations are, I recommend that you record minutes for any significant changes or decisions made for your business, such as adding or removing managers/members, changing your business activities, or purchasing or selling a property. This further distinguishes your LLC as separate from you.

Good luck!

When considering moving your business to a new state, you have several options depending on the specific regulations of that state. One option is domestication, which involves moving your existing LLC from its current state and re-filing it in the new state. This process simplifies your administrative requirements, as you only have one registration to manage. However, it's important to note that not all states allow domestication; approximately 15 states prohibit this option.

If you're looking to move into a state that prohibits domestication and your LLC already has established business activities in its current state, then foreign filing might be a more suitable option. While this approach results in two separate registrations and associated filing requirements, it allows you to continue operations in both states without the need to dissolve and create a new LLC.

Dissolving your existing LLC and setting up a brand new one in the new state is another possibility. However, this option is generally less desirable if you have an existing business and ongoing activities in your current LLC. Foreign filing would be a preferable choice in such cases, as it avoids the complexities and potential disruptions associated with dissolving and establishing a new entity.

Overall, the best approach for expanding your LLC to a new state depends on the specific regulations of that state and the current status of your business. Domestication offers a streamlined solution if allowed by the state, while foreign filing provides a way to operate in multiple states without dissolving your existing LLC.

Hi Shanai! 

It's wonderful to hear about your plans to expand your business—how exciting! Your strategy to leverage an LLC for your rental arbitrage venture is both practical and forward-thinking. For my clients, I typically recommend structuring rental arbitrage operations by establishing an LLC and having the LLC enter into a lease agreement directly with the property owner.

However, if the property owner is unwilling to lease to the LLC, an alternative approach would be to rent the property as an individual and subsequently establish an LLC. You could then sublet the property to the LLC, which would serve as the entity conducting the arbitrage business and renting to guests. This structure is advantageous because it helps safeguard your personal assets. In the event of an accident or legal claim, assuming you adhere to all necessary formalities to ensure the LLC is not deemed your alter ego, only the assets owned by the LLC would be at risk—not your personal assets.

Additionally, it's important to consider how your involvement in guest services may impact the tax classification of your LLC. If you provide concierge-style services or actively prepare the property for guests, this income would be considered active, and it may be beneficial for your LLC to be taxed as a corporation. On the other hand, if your role is limited to facilitating guest access without additional services, a disregarded entity structure for your LLC may suffice.

Best of luck with this exciting endeavor!