can someone tell me the 1st step to find someone to set up a LLC or is it a do it yourself situation.
i'm in the process of refi-ing and now seems like the best time to consider this option
If each property is 4 units or less (classified as residential) it would not make sense to put them in LLC's. For one your insurance rates will go up LLC's are classified as commercial property for insurance purposes.
I agree with a poster that suggested getting a blanket policy to cover all 3
Onarom, I agree that above 4 units is considered commercial, but not sure what an LLC has to do with something being considered commercial, you have the LLC as an additionalinsured so rates should not be affected.
[addsig]
He has three rentals. If he has a $3 million umbrella policy, which in addition to his properties, covers him at his house, in his car, and anything he basically does. What is he going to do that is going to payoff that much? This way he KEEPS his equity if he is sued. With the LLC, you lose, you lose your equity too. Here, you keep the equity and get a bunch of crazy insurance lawyers backing you up all the way. What would he do that would cause a punitive damage award in excess of $3 million?
The reason I like an LLC as the trustee is because it is public information. The beneficiary is not. I could have myself, another LLC, or Inc, or my great Aunt Matilda as the beneficiary, and no one is the wiser.
Andrew,
What RMDane is saying is that theoretically, if there is an insurance policy that there is a team of attorneys fighting for you, but if it is in an LLC, you could lose everything the LLC owns. This is why I recommend both the umbrella policy, and a combination of land trusts and LLCs. This way you still have the protection of the insurance, but if that is not enough you still have backup asset protection, and many layers that separate you from ownership of the property. He also seems to be more trusting of the benevolent nature of trial lawyers, juries, and subsequent awards. Many of the rest of us are not so trusting.
I haven't seen anyone lay out for Lovinit what the purpose of LLC's are, so I'll throw in my 2 cents.
If your 3 rentals are all in your name and some event occurs that would cause someone to sue you (an accident at one of your properties, or you have a car accident yourself), those properties are available to anyone seeking a judgement against you for damages. In other words, you could lose all your properties, plus your own house, car, etc.
If you form an LLC and deed the properties into them (or the LLC buys them), you are no longer the owner of them--the LLC is. If you personally have a car accident and are sued, they can't try to get the assets of the LLC in a judgement.
If something happens at one of the properties owned by your LLC, the most a lawsuit can get is the properties in your LLC--not any of your personal assets (house, car, etc.)
Insurance is a must, as the other posters have recommended, because then instead of losing all your properties, your insurance company would cover (and fight for) any claims.
I've heard Bill Bronchick say that it's up to the individual investor as to how many properties they keep in an LLC, but a rule of thumb is (insurance aside) only keep as many properties as your willing to lose in any given LLC.
A Robert Allen investor I heard speak uses a property value dollar amount that guides his LLC creations: once the total value of the properties reaches this limit (don't remember what his was, but you get the picture), he would form another LLC for future purchases, etc.
For example, a 10-unit apartment building may be best all by itself in an LLC, with a separate LLC with 2 or 3 low-equity single family properties.
Some states don't allow a charging order against an LLC interest. Right know it is state to state. But, eventually, if you have an unsatisifed judgement against you personally, eventually they will get it out of your LLC...
The biggest thing LLCs and Land Trusts give you is anonymity. They can't sue for assets they don't know you own if they are suing you personally. Now, if the accident happens on the property owned by the LLC, then they only sue the LLC.
Sort of. You will actually be deeding the property to the trust, not the LLC. But other than that, you can have the LLC as the trustee, and the Inc. as the beneficiary.
Becareful who or what you list at the beneficiary or trustee of your trust. Florida is the only state that permits a corporation to serve as the trustee of a land trust. The other states require the corporation meet minimum bonding and licensing requirements. Second, do not make your corporation the beneficiary of the land trust without first considering the tax implications. I reccomend my clients use a corporation for FLIPS and LLCs for holds. Thus, if you intend to hold the property, assign your beneficial interest to your LLC; if you intend to flip the property assign the interest to your corporation.
I was also thinking of placing my properties in some form of entity, be it a LLC or some type of Corp. for tax purposes. Is an LLC see worth settng up for taxes as well as protection?
I am going to post this here as well as PM you so I can be assured you would read it.
If I use the LLC's for holds, Who would I place as trustee and who as Benificiary? Would I need two LLC's for this? One as trustee and one as Benificiary?
Also (all I am looking for is educated opinion/advice. Will still do my due diligence in determining whats best for me) When creating a LLC you have to list Managers, Managing Partner etc, would I put my own name there? and if so how is this protecting me if anybody can pull the public record and see me as the owner or manager etc?
Thank you VERY much for any help.
Quote:
On 2004-08-31 15:09, ccoons wrote:
REPrincess,
Becareful who or what you list at the beneficiary or trustee of your trust. Florida is the only state that permits a corporation to serve as the trustee of a land trust. The other states require the corporation meet minimum bonding and licensing requirements. Second, do not make your corporation the beneficiary of the land trust without first considering the tax implications. I reccomend my clients use a corporation for FLIPS and LLCs for holds. Thus, if you intend to hold the property, assign your beneficial interest to your LLC; if you intend to flip the property assign the interest to your corporation.
That is exactly why you don't put the LLC as the trustee, because the members can be looked up (there is a way you can play with this though (mgr. members versus members).
Have an attorney or anyone not related to you as the trustee with the LLC or Corp or whatever entity you wish to remain anonymous be the benificiary
I just created an LLC for 2 rentals in CA with my living trust as the members, not me. If you don't have a living trust (and with 3 rentals YOU SHOULD) go get one first before you do the LLC. The properties have to be insured under a commercial insurance with the LLC as insured, I can not keep the current landlord insurance and name the LLC as additional insured. I also have an umbrella, this covers all my properties, including the LLC. One thing to remember is that the liability on your property is used first and the unbrella covers any additional, so its a good idea to carry a liability based on your equity. Another thing you can do is get in debt, I have mortages on all my properties and the ones with good equity have a line of credit. You don't have to use the LOC but it is recorded as a lien in case you use it, this way it looks like there is no equity and no lawyer is going to sue you for nothing. Yes, read William Bronchick's book it's worth every penny!
I am in the process of creating my business plan. So far, the following has been done:
1.) company name created & filed
2.) received EIN
3.) establishing commercial bank acct
The parent corp. is an LLC that will have 4 members. I was told since I will have multiple companies (one to flip homes, the other to hold) that I need to create separate corporate entities for these two. Is this correct? Secondly, do i need to setup multiple bank accts?
it is neccessary as soon as you are concerned with your personal assets being taken away from you from something that happens with the rental property
In an LLC they cannot come after your personal assets (for the most part)
[addsig]
Or...get yourself an embrella insurance policy that covers all your investments.
Actually, you need both the LLC and the umbrella policy. You may even want to stick a land trust in there with the LLC as the trustee.
I agree with bnorton except I would have the LLC as the beneficiary, not the trustee as the trustee is pulbic record
[addsig]
can someone tell me the 1st step to find someone to set up a LLC or is it a do it yourself situation.
i'm in the process of refi-ing and now seems like the best time to consider this option
If each property is 4 units or less (classified as residential) it would not make sense to put them in LLC's. For one your insurance rates will go up LLC's are classified as commercial property for insurance purposes.
I agree with a poster that suggested getting a blanket policy to cover all 3
Onarom, I agree that above 4 units is considered commercial, but not sure what an LLC has to do with something being considered commercial, you have the LLC as an additionalinsured so rates should not be affected.
[addsig]
He has three rentals. If he has a $3 million umbrella policy, which in addition to his properties, covers him at his house, in his car, and anything he basically does. What is he going to do that is going to payoff that much? This way he KEEPS his equity if he is sued. With the LLC, you lose, you lose your equity too. Here, you keep the equity and get a bunch of crazy insurance lawyers backing you up all the way. What would he do that would cause a punitive damage award in excess of $3 million?
rmdane You seriously underestimate the greed and ability of trial lawyers. They go for policy limits be it $3 million or $30 million.
Quote:This way he KEEPS his equity if he is sued. With the LLC, you lose, you lose your equity too.
I don't follow... Can someone explain this a little further?
Ray,
The reason I like an LLC as the trustee is because it is public information. The beneficiary is not. I could have myself, another LLC, or Inc, or my great Aunt Matilda as the beneficiary, and no one is the wiser.
Andrew,
What RMDane is saying is that theoretically, if there is an insurance policy that there is a team of attorneys fighting for you, but if it is in an LLC, you could lose everything the LLC owns. This is why I recommend both the umbrella policy, and a combination of land trusts and LLCs. This way you still have the protection of the insurance, but if that is not enough you still have backup asset protection, and many layers that separate you from ownership of the property. He also seems to be more trusting of the benevolent nature of trial lawyers, juries, and subsequent awards. Many of the rest of us are not so trusting.
[ Edited by bnorton on Date 08/18/2004 ]
I haven't seen anyone lay out for Lovinit what the purpose of LLC's are, so I'll throw in my 2 cents.
If your 3 rentals are all in your name and some event occurs that would cause someone to sue you (an accident at one of your properties, or you have a car accident yourself), those properties are available to anyone seeking a judgement against you for damages. In other words, you could lose all your properties, plus your own house, car, etc.
If you form an LLC and deed the properties into them (or the LLC buys them), you are no longer the owner of them--the LLC is. If you personally have a car accident and are sued, they can't try to get the assets of the LLC in a judgement.
If something happens at one of the properties owned by your LLC, the most a lawsuit can get is the properties in your LLC--not any of your personal assets (house, car, etc.)
Insurance is a must, as the other posters have recommended, because then instead of losing all your properties, your insurance company would cover (and fight for) any claims.
I've heard Bill Bronchick say that it's up to the individual investor as to how many properties they keep in an LLC, but a rule of thumb is (insurance aside) only keep as many properties as your willing to lose in any given LLC.
A Robert Allen investor I heard speak uses a property value dollar amount that guides his LLC creations: once the total value of the properties reaches this limit (don't remember what his was, but you get the picture), he would form another LLC for future purchases, etc.
For example, a 10-unit apartment building may be best all by itself in an LLC, with a separate LLC with 2 or 3 low-equity single family properties.
Andy
If I am personally sued by someone for something (say a car accident) - They can go after the LLC that I own?
How do you avoid that?!? Put the house in a trust and have the LLC the beneficiary?!?
Can someone explain how to avoid this liability simply?!?
Thank you!
[addsig]
Some states don't allow a charging order against an LLC interest. Right know it is state to state. But, eventually, if you have an unsatisifed judgement against you personally, eventually they will get it out of your LLC...
The biggest thing LLCs and Land Trusts give you is anonymity. They can't sue for assets they don't know you own if they are suing you personally. Now, if the accident happens on the property owned by the LLC, then they only sue the LLC.
I have a company that is incorporated. I have 2 rental properties. Both are in my name.
Can I deed them to an LLC I will create, make that LLC the trustee and make my Inc. the beneficiary?
The LLC would have whos name as partners? mine? what would be the recommendation from you experienced gurus
REPrincess,
Sort of. You will actually be deeding the property to the trust, not the LLC. But other than that, you can have the LLC as the trustee, and the Inc. as the beneficiary.
REPrincess,
Becareful who or what you list at the beneficiary or trustee of your trust. Florida is the only state that permits a corporation to serve as the trustee of a land trust. The other states require the corporation meet minimum bonding and licensing requirements. Second, do not make your corporation the beneficiary of the land trust without first considering the tax implications. I reccomend my clients use a corporation for FLIPS and LLCs for holds. Thus, if you intend to hold the property, assign your beneficial interest to your LLC; if you intend to flip the property assign the interest to your corporation.
[addsig]
Hi All,
How does one buy a property that cost say 200K with a newly formed LLC?
And if I can't buy the property with my LLC but hold the Property in my name, won't my assets be vulnerable.
Is it possible to buy in my name and pass ownership to an LLC. And if so, will this still make me vulnerable to lawsuits.
How easy is it to pass ownership to an LLC if at all possible
Thanks
Ciroma
I was also thinking of placing my properties in some form of entity, be it a LLC or some type of Corp. for tax purposes. Is an LLC see worth settng up for taxes as well as protection?
Ciroma, you can use a quit claim deed or the more reccomended warranty deed to change the ownership.
NHRalph, yes, the LLC gives you tax bennies as well as a corp, for properties held long-term it is better than a corp
Clint,
I am going to post this here as well as PM you so I can be assured you would read it.
If I use the LLC's for holds, Who would I place as trustee and who as Benificiary? Would I need two LLC's for this? One as trustee and one as Benificiary?
Also (all I am looking for is educated opinion/advice. Will still do my due diligence in determining whats best for me) When creating a LLC you have to list Managers, Managing Partner etc, would I put my own name there? and if so how is this protecting me if anybody can pull the public record and see me as the owner or manager etc?
Thank you VERY much for any help.
Quote:
On 2004-08-31 15:09, ccoons wrote:
REPrincess,
Becareful who or what you list at the beneficiary or trustee of your trust. Florida is the only state that permits a corporation to serve as the trustee of a land trust. The other states require the corporation meet minimum bonding and licensing requirements. Second, do not make your corporation the beneficiary of the land trust without first considering the tax implications. I reccomend my clients use a corporation for FLIPS and LLCs for holds. Thus, if you intend to hold the property, assign your beneficial interest to your LLC; if you intend to flip the property assign the interest to your corporation.
REPrincess,
That is exactly why you don't put the LLC as the trustee, because the members can be looked up (there is a way you can play with this though (mgr. members versus members).
Have an attorney or anyone not related to you as the trustee with the LLC or Corp or whatever entity you wish to remain anonymous be the benificiary
I just created an LLC for 2 rentals in CA with my living trust as the members, not me. If you don't have a living trust (and with 3 rentals YOU SHOULD) go get one first before you do the LLC. The properties have to be insured under a commercial insurance with the LLC as insured, I can not keep the current landlord insurance and name the LLC as additional insured. I also have an umbrella, this covers all my properties, including the LLC. One thing to remember is that the liability on your property is used first and the unbrella covers any additional, so its a good idea to carry a liability based on your equity. Another thing you can do is get in debt, I have mortages on all my properties and the ones with good equity have a line of credit. You don't have to use the LOC but it is recorded as a lien in case you use it, this way it looks like there is no equity and no lawyer is going to sue you for nothing. Yes, read William Bronchick's book it's worth every penny!
I am in the process of creating my business plan. So far, the following has been done:
1.) company name created & filed
2.) received EIN
3.) establishing commercial bank acct
The parent corp. is an LLC that will have 4 members. I was told since I will have multiple companies (one to flip homes, the other to hold) that I need to create separate corporate entities for these two. Is this correct? Secondly, do i need to setup multiple bank accts?
Guru's I need your expertise!!!null