All Forum Posts by: Sean Morrison

A few things about moving a primary residence to an LLC. As an LLC, you could lose any homestead exemptions for property taxes. And insurance rates (both homeowners and flood insurance) could go up significantly.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information. 

It's not necessarily complicated, though there could be some paperwork involved. You would replace your name with the new LLCs name on any of these documents. For example, you may deed your interest in properties over to the LLC; change your joint venture agreements to reflect the LLC rather than partners; and sign new contracts with management companies. You may find resistance with mortgages who will want to keep that personal guarantee. This is assuming your properties are held in local LLCs. If not, you'll also need to register this new LLC as a foreign LLC in each state (though it's typically better to simply have a local LLC, which is then owned by the holding LLC). Having said that, the LLC is a pass-through entity, so the taxes wouldn't change between the LLC and you personally.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

For some states there is an asset protection benefit to having multiple members. Often, a single member LLC will be treated by the courts as the individual rather than a separate entity. Whereas a multi-member LLC will be given the liability limitations. It might play out where a foreclosure of the LLC is allowed for a single member LLC, but a charging order is the only remedy for a multi-member LLC. Frankly, it's different by state so you'd want to talk to a lawyer who understands those local issues.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

The key problems have been identified. 

1) It's likely the LLCs are doing business in CA, but you're just hiding it from them. If they find out, they will want their money. 

2) CA doesn't recognize series LLCs, so a court would likely treat them all as one entity unless they were all individually registered in CA. 

3) Since no LLC is apparently registered in CA, the CA courts will not recognize any legal protections provided by an LLC. If your properties are in CA, your lawsuits will be there too. Why have an LLC without the liability protection?

4) Revocable trusts almost never provide asset protection. At best they provide anonymity, but that's not the same thing. 

5) By collecting rent in your own name, the tenants are doing business with you personally. They don't need to sue the trust or pierce a corporate veil (though they can likely do both). They do business with you, so they can sue you personally. 

6) Lawsuits against entities like trusts and LLCs don't stop at what the lawyer can look up online. Ultimately, there is a court order to disclose ownership information, and failure to comply leads to contempt charges. Good asset protection is about building strong protections, not hiding stuff, because that usually fails once it enters a courtroom. 

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Two members in an LLC is a partnership, regardless of their relationship (though there are legal oddities, especially with asset protection, in community property states). Sometimes there is value in having more than one member when a single-member LLC could be pierced for liability purposes, whereas a partnership LLC would be limited to a charging order. But this all sounds far more advanced than what you're talking about. It's also unclear who owns the house. Is the deed in the LLC's name, and the mortgage in your personal names?

If you do an entity, seriously consider an LLC instead of a corporation. Check out this https://www.biggerpockets.com/...

Great thread on wholesaling in Louisiana: https://www.biggerpockets.com/...

Just want to throw this out there: if the daughter is the only heir and the total value of the estate is low enough (differs by state), sometimes that can be handled by a small estate affidavit instead of probate. If so, no long probate, just file the affidavit to transfer ownership to the daughter.

This seems like one of those situations where more effort is put into avoiding taxes than making money. Taxes are annoying, but they're a percentage of earnings. So is your effort better spent on creating more value, or avoiding taxes? Typically, earning more nets you more. If you're making tons of money in your states great, but don't forgo a great deal because of the tax rate.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. In other words, they won't give you Wyoming's LLC protections, they'll give you the local protections. If you want your Wyoming LLC as a holding LLC, you could do that, but it's just more paperwork and fees. The value in having a holding company like this would be to protect property in state A from property in State B.

But California is going to require you register each LLC, no matter where they are, as doing business in California and that's $800 per year.

And yes, you can register an LLC very easily with the Secretary of State, but that's just step 1. Remember, you're talking about a company with potential subsidiaries. You'll need agreements and documents in place outlining the parent-child relationships of the companies, spanning multiple states' real property and asset protection rules. Lots of people go it alone, but not the serious players.