All Forum Posts by: Scott Smith

Hey @Matthew Sloan. I'm inclined to agree with 

@Ryan Blake that you should be looking for an attorney with experience forming Series LLCs, ideally one who has formed them for real estate investors before. Forming a Traditional LLC is fairly straightforward, but with any entity, particularly the lesser-known Series LLC, you want your documents drafted and filed correctly. This is not a "DIY project." Compliance is also an issue that an experienced attorney can help you manage. You're correct that improperly drafted documents and noncompliance could compromise the asset protection benefits of the structure.

Hi @William Michael. My friend @Dan Barli is correct that you need to be aware of the fact that these transfers can trigger the due-on-sale clause. One way to "get around" this issue is by using a land trust. I've written about this subject before here on BP. Maybe this article will be helpful to you.

An asset protection plan that ensures your other investments are separate can assist with mitigating some of the risks here. Agreed that you should certainly be speaking with an attorney you trust before signing anything related to this deal.

@Hector Bilbao Anonymity simply strengthens the protections provided by LLCs, Series LLCs, etc. Anonymity makes it more difficult to personally connect you to the structure or "pierce the corporate veil." Some investors want the additional layer of protection. LLCs and Series LLCs can be used in conjunction with Anonymous Land Trusts for this purpose. What's best for you (or any investor) is between you and your chosen professionals.

Thanks @Brian Bradley! Yes, many investors have questions about the DST. The biggest one I get is: Why is the DST particularly useful for investors based or doing business in California?

Short answer: The DST is viewed as an estate planning tool and therefore not subject to the California state franchise tax that an LLC would pay.

Great info here! Yes, always make use of your friendly qualified professionals when forming a DST or any other structure for the purpose of protecting real estate assets. I cannot stress how often I hear about investors forming entities then not using them appropriately or failing to maintain compliance. This is less likely to happen when you form your structures under the supervision of a qualified professional. Thanks for the shout out and educational effort.

@Venu Vedre Hey there! Just confirming that Justin R.'s info is correct. Thanks to @Rachel Bier also for the shout-out. 

Basically, the DST is the option that avoids franchise tax and gives the protections of a Series LLC structure, particularly when used in conjunction with trusts. From this lawyer's perspective, the DST is a no-brainer for Cali investors. The only reason more aren't using it, I speculate, is because it's not nearly as well known as Traditional LLCs--which come with plenty of red tape for Cali or those doing business there. California has far-reaching laws at the state level that make LLCs less advantageous for Golden State investors. The DST is your best alternative, and I'm happy to answer any questions you may have about this structure. Finally--MANY investors have successfully used DSTs as asset protection tools, and they have some handy tax and estate planning perks as well. Good luck and I hope some of that is helpful!

@Ryan O'Donnell -- Welcome, first and foremost. It just so happens I have some info for you that was published when you asked this question!

Thanks for the shout-out @Brian Eastman.  You rock.

Ryan, you can see the articles on both the different types of LLCs and Series LLC vs. Traditional LLC at this link. Those should answer your very basic questions. And yes, I'm a HUGE evangelist of the Series LLC for real estate investors. If you'd like information on that, let me know what you need to know. It's truly the biggest innovation in asset protection that I'm aware of. And it makes running and growing your business easier/less expensive. I'm just a big fan. Of course, your situation might be unique. So read up on your options, and I'm happy to answer any questions you may have.

@Brian Ellis

I can see why you might be concerned that your lawyer isn't experienced in this area. However, only an attorney familiar with your personal situation can give you the best advice. Ideally, that lawyer should know a thing or two about asset protection.

Is the attorney suggesting an Anonymous Land Trust (AKA Title Holding Trust)? If so, he's on the right track. This is actually a way to *avoid* friction with the bank. For more on that, see this previous BP article.

S-Corp Vs. LLC: Making that call will depend on personal factors like your income, tax situation, partnership/membership issues, and much more than anyone can ethically go into detail with you on this forum. An S-Corp would be less appropriate for lower-income, newer investors or those who could easily form a single-member LLC. It's a highly personal decision that will require, well, personal information.

I hope some of that was helpful regardless! Let me know if you have additional questions.

@Brian Bradley Thanks for your kind words. Gotta love my fellow lawyers fighting the AP good fight.

@Charles Chiu BB is correct, you are at an advantage as  Texas resident. Here's some information about why Texas is great for forming LLCs and Series LLCs.

I'll take your questions in order:
1. Yes. In fact, I encourage my clients to form a Traditional LLC shell corporation to conduct all business with the public. That includes property management. You could accept these payments personally if you keep your banking impeccable and use an asset holding company, but honestly, the LLC shell corporation is easier and often offers greater protection.
2. Here's some info about using a land trust to transfer your property without triggering that pesky due-on-sale clause. Your lawyer can assist here, too.
3. Nope! You can form in any state. 


Everyone else: Brian knows his stuff. Listen to him! If you're unclear on how things like land trusts work, well, that's what us pros are for.

@Heath Ryans Thank you for spreading that information of mine, and I hope you guys find it helpful!

@Giovanni Luna
Hi there! I do have a LOT of information on LLC subjects that I'm happy to share. There are additional BP posts on this topic as well if you would like additional information about LLCs.

I'm an asset protection attorney and my opinions on this are informed by that experience, as well as my own experience investing. Are you forming your LLC for asset protection purposes? Texas has extremely favorable laws for LLCs, including no annual taxes. You will still have to file "no taxes due" with the state Comptroller, but this is a snap. I do it on behalf of clients all the time and am not the only attorney to do so. If you have a lawyer's help, they may be able to shed some light on what's best for your individual siituation. However, from where I'm standing TX and DE beat Florida any day in terms of business friendliness.