All Forum Posts by: Scott Smith

@Sarah Fulton, since you are an experienced investor the Series LLC may be of interest to you on individual deals if you want to protect your other investments from a deal that has different ownership and risk.  Once you have created the initial set up, you can add deals and limit liability while tailoring management and ownership to the deal.

Here is a graphic that visualizes some of the factors to consider as you partner, since you expose your assets with your partner to the risks involved in flips.

@Jason Bilbrey, the pros cons are sort'a endless when I don't have the facts.

First, the discussion was about someone living in California, and that state taxes each LLC whether CA or foriegn a minimum of $800/year. I reviewed a case last week where a person was paying $3,200 annually just to have limited liability separation between sizeable assets. In California, it is better to hold assets with a DST which is untaxed and can operate in series.  The operations like property management need to be in an LLC to protect the property assets and personal assets from the rental or what ever business operations are being performed that create value for the business - but that LLC is not a series and does not own land trusts.

As an LLC builds credit worthiness and financial resources, it gains the opportunity for anonymity to use nominee trustees on titles, so the personal buy is not required but the land trust is used to help with anonymity

That said, I really liked @Peter M. advice to use a real lawyer and agree he is an informed investor.  I am sorry I didn't have time to review all items in this blog, but if you have something specific I would love to give my opinion!  Here is a graphic that shows what an asset protection plan "looks" like and it will be as complicated as the amount of assets it protects.

@Anil Rathi, sorry for the delay in answer - technical difficulties!

Your question on finance probably is one to ask your bank, since I am not sure if you mean a joint account or setting up an account for the LLC. If you have a single LLC that acts as operating company (property management, public exposure) and holds assets, then your bank will let you know what you will need to authorize who can transfer funds. Normally, each LLC has separate bank accounts to maintain separation of funds between businesses and private funds. When there are sizeable assets for individuals or businesses, I recommend separating operations from assets using traditional and series LLCs to limit exposure to the minimum asset based required of each business.

If the finance question relates to transfer of assets (i.e. land title), this would be regulated by the local authority where the property is registered, and requires a notary who may want a copy of the LLC paperwork to establish authority as trustee for signing purposes.

Your original question was concern for litigation directed at "you" and not your spouse. In operating agreements, we identify both the members and the managers of the the LLC. The litigation normally is directed at the LLC, with the managing trustees responding to the litigation on behalf of the LLC - not responding personally; and the members assets in the LLC at risk in any judgement against the LLC. The best way to protect trustees personal finances from litigation is to separate bank and credit accounts from any personal accounts, and transfer funds between accounts as needed. An accountant can best explain how to do this.

You can see, I don't have enough information from your question to give a simple answer - but I tried!

We use land trusts that are protected by the St. Germain Act from due on sale calls.  The facts of each case are important, so it is best to establish what is legally possible.  Here is an article that explains how we move title to a LLC with a land trust.

@Ken Latchers, @Samantha Kay said she was a newbie and @Tenae Wilson was following your thread - I don't think either are attorneys and your advice seemed so certain. With due respect to your opinion, a case can be made for the strangest set-ups for and against LLC's in certain States and I do so. I always like to trace back legal advice to law ore facts to make sure I don't inadvertently mislead people, but that is because I am an attorney. You may be totally correct, I just was interested in any article to support your opinion. Here is my article if you want to check it out.

@Tenae Wilson, you do not need to establish an LLC in every state you buy property in. In those cases, the LLC is a "foreign" company and many states have requirements and some franchise fees for both resident and the foreign LLC. @Ken Latchers, I guess if you have an existing LLC in a different State, it would be an advantage to register the LLC than to create one in the State to do business there?

No - the title has to change to place the property in an asset protection structure. You will find alot of information on "piercing the veil" and other topics that explain details about property titling and confining business within a LLC. Some of them are more theory than reality. Here is some information on what LLC protection is designed to accomplish.

My background has been developing asset protection plans which make use of LLC's, and names can be an issue in some cases.

For high visible or risk investors like celebrities and high net worth individuals, anonymity is a good thing. Generally, all the public activity like property management is done in an Operating LLC, and the assets are held in series LLC's to compartmentalize risk. It is best to keep naming unique to each asset to reduce traceability and risk. The operating LLC has no assets, so it can bear an individual's name if that helps with marketing.

Here is a graphic of the elements in asset protection, and LLC's and their names are part of this planning process:

For your next properties, another strategy is to buy in your name with the best financing you can get, then transfer to a land trust without triggering due on sale, and then deed the property to the LLC.

@Jaspreet Singh, You may want to consider separating the properties in the LLC with a Delaware State Trust if you are interested in reducing risk in the investment and franchise taxes paid to California, especially if you plan to add more deals in California in the future.  I assume the LLC is the operating company for the properties. Here is a graphic for asset protection planning: 

Wish you the best with your investments!