Located in Texas - I have a LP LLC setup i.e. properties are in LP, I am limited partner in the LP (to minimize liability) and my LLC is the General Partner in the LP (I am managing member of LLC). Three questions:
Is there a recommended max number or dollar value of properties I should put in the LP before I need another company?
Should I consider either doing a Texas Series LLC instead (I’ve heard these have quite a few disadvantages too)?
Should I get rid of the LP and put the properties in the LLC (in this case I again have to address question 1 above).
Wow. Did you set that up or did a lawyer set that up? That seems a little too complicated to me, unless you (a) have a lot of money on the line - in excess of $1mm, and (b) ALSO a lawyer set it up.
I know a guy who owns more commercial properties in his OWN NAME than you can imagine. This guy is probably worth $50mm, and it’s all 100% in his personal name. When I first saw that I thought he must of been some sort of lucky doofis, but nope, he’s been doing this for 40 or 50 years, and he has more insurance than most people could ever imagine. So he’s fine.
However a Texas LLC is what was recommended to me by a lawyer, either with one owner or multiple owners - its fine. If you keep separate checking accounts & records for all of your activities, don’t commingle funds, and do all the basics like that - you have the full protection that the LLC has to offer. The filing and ongoing maintenance requirements of an LLC are a lot easier than that of a corporation, which is a plus.
However you STILL need good insurance. In most lawsuits nowadays, the property manager, owners and LLC are named in lawsuits. You need your insurance company to be able to stand in if needed to defend you.
Also, like with my insurance, it specifically protects me (a member / member-owner of the LLC) AND the LLC itself.
I have had one instance where I had a major issue happen, and I had six claims filed against my insurance. Yikes!!! I had a few sleepless nights over that one.
However it was NOT the LLC’s fault, or mine, but actually the tenant’s fault. My insurance company told everyone to “kiss my big insurance company butt”…but in nicer words, and in legal terminology…and over 2 years later the statute of limitations has expired…and no 3rd party was paid a penny in claims.
So get yourself an LLC or other non-complicated legal entity, and good insurance too! =)
Regarding insurance: When you get quoted costs for insurance on a property, the insurance company probably quotes you a premium based on around 200-300k liability. The premium increase to go from 300k to either 500k or 1MM in liability is really minimal and IMO is worth the extra peace of mind. I carry the MAX liability on all of our properties. One insurance company gives me 1MM and the other gives me 500k in liability coverage.