Multiple LLCs?

Why do some people suggest that a new LLC be created for every commercial/apartment deal? And how does that compare with a trust or LLP?

If I have my LLC, can it use or own separate LLCs for those deals?

I mean how does someone hand out business cards if they are constantly creating new LLCs for each deal?

Brian,

Everything in a given LLC is at risk from a lawsuit against that LLC. So, if you have 10 properties all in the same LLC and one of those gets sued, then they are all at risk. On the other hand, if a person were buying SFHs, it would be cumbersome and expensive to have a LLC for each property. So, YOU need to decide how much risk you’re willing to take in each LLC and stucture your business accordingly. I try not to have more than 10 rentals in each LLC. However, for my apartment buildings, I only have two per LLC. If I owned a McDonald’s or something like that, it would be in its own LLC.

Good Luck,

Mike

Thank you.

Also, do you have 1 company that you pay yourself from, that you have on your business cards? Or that invests money into these other LLCs?

Like can I have The Something Group LLC that invests money into or owns 10 LLCs, 1 per apartment building?

Brian,

Each of my LLCs is a company. It has its own checkbook; its own accounting; its own tax return, etc.

Mike

You also need to be careful with the ownership of the LLCs. If the same people own them all, then they can be treated as one.

You can also use equity stripping with an LLC and another entity to protect all the property just as effectively as multiple LLCs. If your state has a series LLC, that is even better than having multiple LLCs.

Yes, I want to make sure I am protected. I dont need someone suing my one LLC and ending up with everything I own.

Can I have a main LLC that invests in other people’s projects, as well as invest in my temp LLCs that buy properties? Then after I sell one, dissolve the temp LLC? Or use it to buy another property?

Ex. My Main LLC > invests in my A LLC which buys 6 unit building. Also, Main LLC invests my B LLC which buys another 5 or 6 unit building. Also, Main LLC invests in John Doe’s project.

Then I sell the 6 unit building, do I dissolve A LLC or use it to buy another property?

Why would you want a main LLC to invest in your other LLCs?

Why would you shut down a perfectly good LLC after you sold the only property in it?

I don’t understand what you’re trying to do.

Mike

If you want to do one of those master/slave plans, you can have an LLC for each property with a limited partnership as the single member. The LP appoints a manager. Another option is to set up a captive insurance company and bleed all the wealth out of the LLCs.

Definitely check with a local attorney familiar with the laws in your state. What’s good for someone in TX may not apply to someone in CA.

I mean, if I have a small office and employees, and computers, etc, shouldnt that be run as a business in itself, and protected in an LLC? Just like the properties are protected in separate LLCs?

And if I wanted to make the downpayment for a property, along with another investor, do we each have to use separate entities to protect ourselves?

Always separate the property from the business. I would even go a step further and use a leasing company to own the assets used by the business.

You can use a partnership, joint venture, or an LLC taxed as a partnership. The key here is to make sure you spend a good amount of time on drafting the operating agreement.