I know that it is recommended to form an LLC for each individual property but what what if they are low valued properties like say $10K-30K each home…is it better to open one LLC for like 5 properties?
I mean if you had 40 different LLC’s how do you keep track fo all of these bank accounts etc. if you have say 40 homes?
one per is, technically, the best protection since each would be protected from the other. However, you are correct that it is not the most efficient, so the compromise is a few in each.
Once you have that many, you need to establish a new entity to act as “manager”. All of the transactions would run through one “checkbook” with a management agreement with the LLCs. They would own, but not conduct transactions except a few times a year.
What exactly are you trying to accomplish?
If you are looking for asset protection, I would not recommend this type of vehicle (forming multiple LLC’s). LLC’s are used for “LIABILITY” protection. that is much different from Asset Protection.
I have some Ideas but I would need to know what you are trying to accomplish?
and why not? If all your properties are held in a single entity, each asset at risk to any issue that arises in any one of the others. One claim at one property can bring down them all.
Individual silos insulate each asset from the others.
I am looking for the best way to manage multiple low priced homes 10-30k …I just dont want to have a different bank accounts for each home… I think it would be almost immpossible to manage them. I have enough trouble keeping my personal bills on time…And if I have 20 homes that is like an additional 60 bills per month… I would LIKE to have 1 bank account for maybe 10 homes or so but I know that this is risky…but I guess it is a catch 22…
I am merely opening Pandora’s box to the Asset Protection World.
yes, it is true that many individual LLC’s will “shield” your property from certain infractions. But, a good attorney that knows how to do an Asset check will find all of these LLC’s that you are a “member” of and can go after the assets contained within those entities, if he or she so wishes to get a claim.
This happens all of the time. The individual, is not protected. What good is it if you have 20 LLC’s each holding 1 property, and a multi-million dollar lawsuit is attached to the individual and all of his interests (ie…membership status with the LLC). Every property and LLC now has a Judgement against it.
if you are looking for REAL ASSET protection, you may want to research how a Nevada Corporation with Nominee Officer’s can virtually eliminate any such Lawsuit. Nevada Corps structured in this manner will allow the owner of the Corporation to be TRULY Annonymus while maintaining complete control.
Ask yourself how OJ Simpson can walk the planet as a free man with a 35 million dollar judgement against him personally, and yet he still lives in multi million dollar homes, drives expensive cars and plays golf everyday at the most expensive courses nationwide?
That is because he owns nothing - on paper. If he were a member of an LLC, his assets would show up on an asset sweep and they would all have his personal judgement attached to them- all 35 million dollars, thus freezing everything he “owns.”
OWN NOTHING … CONTROL EVERYTHING.
amarsjr,
it seems that you are looking for accounting help more than asset protection. I would suggest the utilization of a competent CPA or tax Attorney, or professional Bookeeper. You may inquire with mcwagner. I see he is a CPA. he would better guide you on these types of issues.
<<What good is it if you have 20 LLC’s each holding 1 property, and a multi-million dollar lawsuit is attached to the individual and all of his interests (ie…membership status with the LLC). Every property and LLC now has a Judgement against it.>>
you are incorrect.
membership interest in an LLC is considered “personal property” by statute. as such it is not available to satisfy a judgement creditor. You can read it yourself in the Texas LLC Act. Most states I’ve found follow similar language.
a judgement creditor CAN receive a charging interest against LLC income, but they do not obtain control of the LLC and it’s asset holdings. In practice this is seldom done because 1) the judgement creditor is deemed by the IRS to have “constructive receipt” of the income and becomes responsible for taxes on the LLC income and 2) the LLC never has to make a cash distribution. Therefore the creditor will pay all the taxes on, but never receive any cash from the LLC, effectively frustrating the creditor. Attys know this and so they seldom go after a charging interest.
With regard to NV corporations: there are two kinds of risk: liabilities arising within the entity and liabilities arising without. Your technique will only protect against one of them.
Corporate stock owned is considered an “investment” and as such IS available to satisfy judgement creditors (regardless of who the officers are) of the individual owners. This can give the creditor ownership of the corporation and the assets it owns and/or controls.
Both Corporations and LLCs protect the individual from liability arising within the entity, but only the LLC will protect the company from personal liabilities of the owner. This is because it is considered “personal property” and not an “investment”.
Anonymity only protects the individual from liabilities arising within the entity - because the owner can’t be identified.
Anonymity is great, but it will still leave every property in an entity subject to liabilities that arise from every other property, even if the atty can’t find the owner. Only multiple entities will resolve this issue.
Anonymity is great, but if the individual is sued, investments owned can be seized; personal property cannot. Thus the LLC is preferred to a corporation from any state.
Anonymity is great and it certainly has its place in an asset protection plan, but it is not an “all inclusive” solution. Neither is an LLC (or any entity). And the bloodsucking attorneys will always be looking for prey. Let them find easier picking somewhere else.
I don’t know about OJ, but I do know about LLC’s and they are one of the best and cost effective means of shielding assets from risks.
So I should always form an LLC for each property?
most of my clients have 3 to 5 per
Thanks mcwagner… 
mcwagner,
yup you are correct. I had to re- my post. Here is where I was going … A collections attorney can easily find the owners of an LLC. Now what they will do is sue all of the members of the LLC and the members will have to pay BIG dollars to defend the lawsuit for months. This may cost the members THOUSANDS of dollars. I know of a collections attorney that sued 1000 people a month (in a BIG firm). That is what he told me he used to do.
My recommendation is to Use a Nevada Corp in conjunction with an LLC (for real estate) in order to accentuate the protection and ultimately the PRIVACY.
As to the corporate stock issue … there would be no stock issued, therefore, no creditor can gain any access to the corporation or the corporation’s Assets. The owner is not connected to any stock.
You would use the Nevada corp as a “Cold Corporation” … one that does not do any “active” business. It can be used to record friendly liens against your properties. So when an asset check is done, the property will show the lien as a mortgage against the equity in the property. Of course you would have to have valuable consideration in order to avoid set off. And it would show a corporation that you are not connected to on paper.
<<>>
I agree that there are these 2 kinds of liabilities.
The question is are you trying to protect the equity in the property or the title to the property? or are you trying to protect the individual from the liability?
I think both entities are used in different ways to protect against different attacks.
I think that multiple entities are only one way to accomplish the task you have described. I believe it is not the only way. One must do what is right for each individual situation.
if you are looking for Liability protection … that is the entire concept behind the LLC.
if you are looking for asset protection … annonymimity and control are what is required.
Combine the the two and there you have it!
As per the original post, the intent is to protect each individual property from the other properties and to protect the member’s other assets from risks from any one property.
Property A has a claim. LLC gets sued. Member gets sued.
LLC may lose and lose the property.
Unless the member is found personally liable, the creditor cannot look past the LLC to the member for satisfaction, as he is personally not liable for LLC debts. game over.
If he IS personally liable, then he may have a judgement entered against him, but it will be hollow as he has no hard assets. All he has are membership interests in other LLC’s, which cannot be used to satisfy the judgement. game almost over.
Meanwhile, creditor receives a charging order against another LLC. Creditor now has to pay income tax on the LLC income (per the IRS, the member no longer is responsible for this tax) BUT the member never pays out any distributions of cash. The creditor pays the taxes but never gets cash. That sucks, which is why it almost never happens. game over.
The other properties are safe from being taken over and the LLC can continue to operate, sell the property, whatever. Any cash from income sits in the LLC and gets used up paying office expenses, whatever so that it is “used” but never “distributed”. game over.
Meanwhile, the member still controls LLC’s with assets that can be borrowed against, cash can be loaned to other individuals or companies, etc. In short, maintaining control of the assets gives the member leverage that can be used to rebuild.
Add to this strategy liens and encumberances from corporations with nominee officers, good insurance and an atty with teeth.
I LOVE this game!
you got it! now were talking BULLETPROOF!
LLC for each property has another “benefit” : the Dealer Rule with the IRS. i believe if you buy more than 8 properties in a given yr that the IRS will categorize you as a Dealer of RE and all properties you buy will be taxed at “ordinary income” vs Capital gains… ie) create an individual LLC for each property (ex) 123 Main Street LLC and etc.
what are you trying to accomplish by creating an LLC for each property?
Redwing,
I assume when you say own nothing, control everything that you are referring to land trusts. Believe me, you are not the only asset protection specialist on this forum. To find information they need only read this forum.
As to the question, all you have to do is place each property in a land trust and it’s protected, then take title in your LLC. If there are two unrelated beneficiaries of the trust, EVERYTHING is protected, you are home free.
Da Wiz
mtnwizard,
I use land trusts myself, but I also use the privacy of NV for bulletproof protection.
when I say own nothing and control everyhting, it does not suggest the sole use of land trusts as you assume. How do you control the use of your vehicle without owning it and utilizing a land trust as your means to do it? I thought a land trust can only hold real estate. Does that make sense? I may be incorrect and please let me know if I am so that I may correct myself. You seem to be very knoweldeable on Land trusts. I appreciate your insight.
Yes, people can read the forums, but each situation is unique to itself and we specialize in the state of Nevada. There are a lot of questions about Nevada and depending on the situation, a land trust would be appropriate. Sometimes, Nevada is not the best choice (ie…if you have
a company you want to take public) but in some other situations Nevada is the only State that offers total Privacy. This Privacy is the foundation of Asset Protection. A land trust is a great choice until a federal judge is involved. A trustee can be deposed and given a court order to release the names of the beneficiaries of the land trust. Privacy is now lost and your interests are vulnerable.
There are many ways to get from point “a” to point “b” what I am suggesting is that you must investigate each route to be taken. Some routes may have road blocks and speed traps, others may have construction to slow you down. some routes are open and clear for you to effortlessly get to your destination. It would depend on which route you would choose and how comfortable you are with your choice.
remember, they all reach the same end result.
Redwing,
My LLC is Nevada-based and I agree with almost everything you have said with the exception of the federal judge part. A creditor may reach the corpus of a land trust, unless the trust is irrevocable, or there would be MORE THAN ONE UNRELATED BENEFICIARY (as with the Equity Holding Trust System that I use). This concept appears to be based upon the idea that a co-beneficiary in a land trust can be seen as a “partner,” and a claim (or charging order) effected against a co-beneficiary would be impossible without a dissolution of the entity (the trust) and since an unrelated co-beneficiary is not responsible for the actions of the other: such dissolution would not be allowed.
Henry H. Keno on Land Trusts, IICLE, Springfield, Illinois (1989)
Smith v. B of A; Houghton v. Pacific Southwest Trust and Savings Bank: 111 CA 509, 295 p. 1079,
The CA. Code of Civil Procedures §697.510]
Da Wiz
so back to the example of if someone had say 40 properties, 40 separate LLCs, is it best to create another LLC to manage the 40 LLCs?
then you would only have one bank acct, but wouldn’t that be co-mingling of funds?