We own several buildings and want to transfer the buildings to some sort of entity where we can keep the asset protection features of being limited partners, yet still manage the buildings ourselves? I have been reading that if you both own all shares in an LLC and manage the RE yourself, you’re liable to leave yourself open to a sort of General Partner liability situation :o Have even read the using a second separate Management LLC (controlled by the same partners that own the building) to manage the building is a worthless disguise that can easily be pierced. There must be a way to limit your liability but manage your own property?! BTW, it’s two partners in case that matters. Thanks.
i find all that stuff about seperating ownership and management - to me it sounds underhanded, unless the management company is handling OTHER PROPERTIES, from other totally seperate companies.
then i would say it’s legite.
i’m pretty sure that no internal management procedure will open you up to any LP liabilities. it’s an LLC - period. you manage it by the book, keep excellent notes, minutes, addendums for op agreements and manage finances btb - that should take you a long way toward protecting your “bottom” line.
best options - talk to a corporate attorney. i mean, i would think you have one, given the fact you own a few bldg’s already.
Well here’s the issue and I’m quoting from an attorney “Jay Adkisson” in his book Asset Protection"
" An affluent person should also avoid being the manager of a imited liability corporation, since negligence in the management of the entity…could lead to direct liability to creditors"
Of course one man’s definition of negligence is very different from another’s, but I’d hate to be in front of a judge weighing negligence because I forgot to check if a smoke detector was operating for a new tenant. ???
i think the keyword there is “affluent”
trump is not out there managing anything. he’s completely aloof to the hands on - fix a bulb or smoke detector thingy.
but i mean, if you own a bldg or two, i mean, do you have the revenues that support a manager-managed LLC? if so, more power to you!
Actually, I think the key term is “negligence.” Properly structured and managed entities will protect you from liability as long as the legal issue is not created by your gross negligence. For example, I use an LLC for a specific part of our business and we have an S corporation as the manager. As long as I respect the legal structure and keep the assets separate, keep good separate accounting records, keep the minutes, keep separate bank accounts, etc., I would have no liability. However, if I personally do something that creates liability and it was gross negligence, then I will have liability no matter what.
I find that most of the articles written by attorneys with this approach are in the asset protection business and usually go overboard and make things overly complicated for the majority of us. The challenge is trying to weed through the paranoid and find a solution that works for you and the amount of liability exposure you think that you might have.
I agree that “negligence” is probably the key issue. However a friend of mine just told me a story about his brother who owns a rental house (he owns many). An alcoholic was severely burned because he fell asleep with a lit cigarette. A jury found his brother liable for 80% of the damages due to the fact that the smoke detector didn’t have a battery even though the lease clearly stated it’s the tenant’s obligation to maintain the detector. My point is that with no concept of personal responsibility left in our legal system, negligence becomes a meaningless concept. You own and manage a building, you’re responsible for any accident that befalls anyone in your building, no matter what. So, the question remains, how do you separate the two??
Was the property owned in a legal entity or by the individual? If owned by a legal entity, how did the plantiff argue for piercing the “corporate” veil?