Privacy And/or Asset Protection
Hi! I am a newbie to this site.
I live in Houston TX. I am planning to invest in multi family property. I am a small fish, i.e. investment value would be around $400,000. I will be borrowing money from banks.
What is the most appropriate type of ownership arrangement?
Would that be LLC, corporation, trust, limited partnership or whatever?
My first priority is privacy, second is asset protection minimize liability law suits.
Thank you for sharing your insight.
A trust provides a measure of anonymity. A business entity provides some measure of asset protection.
Nothing will prevent a lawsuit. The entity you use limits your liability exposure to only the assets held/owned by your entity and shields your personal assets from exposure.
Consider a high leverage ratio as another form of asset protection within your entity. When your entity is to be sued, if you have almost no equity in your entity, will an attorney press a lawsuit if there are no real assets to go after?
The most protection I have seen done by anyone so far, was a c-corporation held by an "A" trust of the owner.
Essentially a C-Corporation is bought by the lawyer, in the "A" trusts name that would be protecting you to start with. It makes it harder to get lending, unless you have other collateral or very good credit. But you are completely locked down, and hidden to prevent lawsuits.
Out of all that you mentioned though a C-Corporation offers you the best protection, A trust offers your privacy. Contact an estate lawyer for the best advice as they will be used to people fighting over assets.
Good Luck,
Kyle
As my lawyer told me there is no privacy once you get to the disclosure phase of a law suit. If the questions are asked correctly you will pretty much have to come clean.
To get real privacy you really can not have a lot of control so you can answer honestly. Otherwise you can lie but the downside is not pretty depending on who and when they find out.
If you want to reduce the possibility of law suits and want to limit the damage, have a good structure will do that. People looking to sue many times look for the easier target. If you have little in assets that they can directly sue and you use insurance then you will have a pretty good firewall. Not perfect but good enough for most cases.
BTW - One defense that works to reduce law suits is to operate legally and be proactive with disclosure, maintenance, reference checks, etc.
John
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