Hi: I am a new investor (have not yet purchased a property) but am wondering what an LLC provides that an umbrella insurance policy will not protect? Where do the lines blur between an insurance policy that covers liability versus a Limited Liability Company status?
Seems to me that it would be much simpler to just get the insurance policy and avoid the LLC entanglements. Any advice as to the pros and cons of each would be appreciated–thanks!
Owning property in an entity seperate from you protects your personal assets from risks that arise from your property ownership. The correct entity also protects your income producing property from risks arising from you personally.
This is why I always recommend the LLC form:
Corporate stock ownership is considered an “investment” that can be seized to satisfy a judgement against you personally. This puts the adversary in control of your business and its assets.
An LLC is considered “personal property” and as such (in TX) is not available to satisfy judgements to creditors.
Both forms protect you personally from liabilities arising within the business, but only the LLC protects the business from your personal liabilities.
Insurance is vital, but in todays’s litigious society, a million dollar umbrella won’t touch what Mama’s going to collect when little Suzie breaks her neck on that loose board you didn’t repair. Having properties isolated from each other and from you prevents an adversary from getting ALL of them; the only one(s) at risk are the ones in that respective entity.
bgc,
Da Mark gave you excellent advice. Your LLC will provide maximum protection for your personal assets. Placing your property into a land trust, then taking title in your LLC will provide protection for the property itself, which is still partitionable and subject to liens and encumbrances.
Da Wiz