I own some commercial property, which is inside an LLC. I manage the properties myself. Some of the information I have been reading here indicate that my assets may not be protected since I manage the properties myself. Please explain and offer advice. Thanks.
The plaintiff will bypass the LLC by suing you personally for any injuries related to the property. You can be the owner or the manager, but not both. Either hire a PM or hold the LLC interest differently.
Any suggestions on holding the LLC differently?
You could use a non-grantor trust, partnership, corporation, another LLC, captive or some other combination. You could also hold the property in a trust with some kind of fractional ownership. You’ll need to sit with a qualified planner to work out a system that makes sense for your situation.
How does hiring property manager protect personal assets?
How do I find a good planner? I am in western NC, near Charlotte. Local attorney set up LLC but this issue has never arisen, nor with my accountant.
It prevents members from getting sued personally for causing injuries related to the LLC. You don’t lose if you didn’t build/repair the deck that collapsed. You aren’t the one who failed to clear the snow and ice properly. You aren’t the one who broke the fair housing law. You aren’t the one who improperly installed the heater that gave off too much CO. You aren’t the one who repaired the stairs that broke. You aren’t the one who failed to maintain the property in good repair.
Have the attorney and CPA hire a national planner. Most attorneys have nothing more than a basic understanding of the issues and law involved. Ideally, you want a person who drafts the documents and actually has experience in court defending and attacking them.
what if the property is a single-tenant, triple-net-lease commercial property with no “management” required…tenant responsible for everything? Am I safe with an LLC or do I still need to restructure?
You still have exposure to contract disputes and legal issues with the property as you can’t make a tenant responsible for your legal obligations, and the LLC won’t extent to any liability to your actions outside of the business.
There’s also issue with estate taxes and business continuity, but that is a totally separate discussion.
The effort a plaintiff will take to sue you depends on how much they can get out of you/your property. First know how much $$ and equity you are trying to protect. If you have little or no equity and are fully leveraged, you won’t be attractive to sue. They’ll just go after insurance.
If you have significant equity, it may be worth it to spend some $$ for good legal counsel and the cost of proper restructuring. LLC’s are weaker than LP’s with Domestic Security Trusts and other entities as general partner. Expensive and complex, but perhaps worth it if you are trying to shield large equity.
I own a rental property, under LLC as myself as owner and my father as property manager… is this fully protecting my assets. Also, I have a home equity line attached to that property does that also need to be under the LLC?
An LLC is insufficient to fully protect yours assets, but I don’t see any property liability that will filter to you personally as long as you take no active role in the management of the LLC assets.