Hi all,
My partner and I want to start up a LLC for the purposes of Real Estate Investment. The real purpose of this is so that we can protect ourselves if things go wrong, especially from the credit side. If we were to borrow money and the project goes wrong, we think that the credit issues can go against the LLC, instead of our individual credits.
Are we correct in this thinking?
TIA!
A new LLC will almost certainly not qualify for financing like that on its own. You will need to sign a personal guarantee with the bank stating you are personally liable for the loan to the LLC. We have an LLC which holds a significant amount of property and we still have to sign personal guarantees for our loans. A new LLC on its own isn’t a responsible debtor. A person with garbage credit could fill out the articles of organization and pay the fee to establish the LLC. The banks know this.
The liability that an LLC is intended to protect from is not the liability to the bank. It is the unforseen liability from a “hostile” creditor (lawsuit).
OR
To protect the LLC from an unforseen liability arising from one of the members.