First I need to explain that I already read almost all messages and discussions, and I understand technically, I can form a LLC anytime no matter how much equity value in everything I have.
My question is according to my current situation, is LLC necessary for me?or My equity is so low and currently don’t need one?
My equity value is around $90,000, with cash flow 22k every month.
I already bought one property and right now it is under contract.
My plan is to buy 2 properties this quarter, using one month to rehab and 2 months to sell. The investment amount will be around 60k-70k.
I understand that I can have a LLC right now in case anything happens in that 3 months period, and a LLC should hold assests value up to 250k, (in my case only 60-70k),so a “worth protected personal assets” value should be way higher than 250k, obviously, in this case I don’t have so much. In real world cases, based on your experience, Do I really need to form a LLC at this time?
I think you are looking at this thing from the wrong perspective. In the absence of a business entity, all your personally held assets are at risk because you are personally liable.
Even though the investment property only has $90K equity, your liability exposure is not limited to just the investment property. The $300K equity you have in your personal residence and everything else of value you own is also at risk in the event of a lawsuit.
The value of the LLC lies in its ability to LIMIT your LIABILITY to only those assets owned by the entity, and no personal liability attaches to you unless gross negligence is proven.
Thank you very much Dave, you make my situation quite clear!
Now I understand that. I have a further question, can I freely transfer the assets under LLC in or out to my Personal assets?
For example, If my LLC makes some law trouble for me, after that happens and before a judgement issued, Can I transfer some valueable assets, like property, out from LLC to my personal assets so that it can be protected from attack?
I guess you could, but I suspect that a transfer under those circumstances will be voided by the court and you may incur other unpleasant consequences.
This is a question to ask your attorney.
The reason you have a liabililty insurance rider on your hazard insurance policy is to defend you against a lawsuit arising out of your business activity and to pay any judgement that may ensue (up to your coverage limit).