All Forum Posts by: Scott Smith

@David Wilson, I agree with the above comments and suggest developing the agreements in an LLC help to formalize your understanding of how things will work and protect your relationship with your partner. Things to consider: Operating agreement, Property management agreement, Operating company and an asset holding LLC. With the surplus cash you have to invest, working up an asset protection plan would protect your cash from any unforeseen problems with a new investment. Here is a graphic of some of the things to consider:

One strategy for investors is to buy properties in their personal name to get the best financing. After everything is finalized with the property warranty deed recorded, transfer this to the newly formed LLC.

If you currently are a high net worth individual and want to protect your personal wealth from this new investment, and financing is not an issue, I would set the LLC up first and consider anonymity to protect your personal wealth.

Wish you well!

@Ken Latchers, not sure why you believe only LLC's that are set up in the State of location can own property. Generally, out of State LLC's can own property in other States by registering as a foreign LLC in the State where the property is located. Am I missing something here? If so, sorry!

@Brent Tice, I noticed in the comments above some suggestions of merging and creating parent/child structures.  Here is a link that can help you get a better understanding of a merge. As far as creating parent/child structures, one way requires incorporation as a series LLC. That is done in States that support series LLC like Texas, but not Wisconsin. From my understanding Delaware was the first state to enact legislation authorizing the creation of series LLCs. Several states have followed suit including Illinois, Iowa, Nevada, Oklahoma, Tennessee, Texas, Utah and Puerto Rico.

You can create the parent subsidiary relationship with traditional LLCs in the other states (It is just easier with series LLCs!).  Check out this link.

Hope this helps!

@Gloria R Lowen, when you get around to the business entity, check out this article that may help you tame the high operational expenses imposed by the State in California.  Not quite sure on the request related to other investors, but I put some thoughts down on joint ventures that show the usefulness of agreements used in the formation of business entities.

Good idea to get a solid team upfront in your ventures.

@Simon Ruiz, a good strategy in California is to use the Delaware Statutory Trust that has similar protections to LLC's and avoid the franchise fees of California.

@Andrew Ashby, great post!  We see alot of partnerships creating relationship problems that take time to heal, if they ever do.  Wishing you the best for yours.  Hammering out operating agreements as well as other details for partnerships is well worth the time investment since it saves relationships, especially in family situations.  Too bad we often feel this planning questions the strength of the current relationship, when in reality it strengthens the relationship.

Thanks again for your story!

@Mike M., your state doesn't provide series LLC's. LLC's are governed by the State they are in (mine does), and protections are afforded by that State. Here are the States I think are best for LLC's, and there are others also.  Generally, the best asset protection is provided by having an operating LLC handle all the visible operations of your business - rents, maintenance, etc.  Hold the assets in separate LLC's or trusts that allow you to tailor to partners and specific needs of of the asset.  You need property management agreements between your asset holding LLC's and the operating LLC.

Getting back to basics, unless you have alot of personal assets now you need to protect from your first deal, you can probably relax.  If you are a trust fund baby, then you need to take care since real estate can jeopardize your personal assets if you do things in your own name.  If no $$$$$ from family, then I often recommend a strategy to use your personal name to secure financing and property, then transfer to a LLC.

@Adam Harper, a strategy to use is to have the initial trustee be your lawyer, and when transfer of assets occurs to move to the trustees of your choice. Then your attorney is listed on the LLC paperwork. There are other strategies that can be used in title transfers when privacy is the objective. Here is what I think of when I develop an asset protection plan. (Sorry, I saw your question was about a website registration - my bad!, use a registered agent (Lawyer) for that one also)

Each area has many strategies that work together to accomplish what is needed.  Generally, when you understand what you want personally you can tailor it to your needs and budget.

@Mary Blanco, this article identifies a strategy I have seen used successfully in California to avoid the franchise fees and regulations that were spelled out earlier for investors in California. Another strategy is to have an operating LLC to do property management for all properties, and hold the assets in trusts that provide many of the asset protection properties of series LLC's. In California, spending a little more setting up the asset protection plan pays off in reduced operating costs.