Liability
In this forum, I find that you all are more knowledgeable and creative, than many attorneys or accountants. That said, here's a question. I've read the posts on asset protection, and the general concensus is an LLC serves a useful purpose. Enough liability insurance provides the same protection, but in a limited way. In your opinion, given the litigous nature of society, what amout would one carry to be adequately covered?
As LJeff stated, buy as much as you can afford. Liability insurance is not a replacement for enity selection/creation. Rather the two should work together to provide protection...
Happy Thanksgiving!
Tim[ Edited by norrist on Date 11/24/2004 ]
Norrist,
I think you just re-phrased my question, more to the point. The relationship between llc and liability protection is complimentary. From the standpoint of liability, would you create an llc for each property, in order to limit your exposure?
Quote:
From the standpoint of liability, would you create an llc for each property, in order to limit your exposure?
Reply
I have seen a lot of developers and builders doing just that, so they can avoid to lose a lot. But is it ethical?
One of our Attorneys highly recommends a separate LLC for each property. I don't know what you mean by "ethical", though...
I was listening in on a teleconference call by William Bronchik and he said that the best way to protect RE was to have the property held in a Land Trust and have an LLC as a beneficiary of each Land Trust.
I don't know if you would need multiple LLC's under this scenario, but I am guessing that you will need multiple Land Trusts.
Thanks.
JS.
Is it ethical?
I mean there are some developers or builders build a condo building for example. If there are any problems brought up by the people who bought the units. They don't know who they need to deal with because the LLC who built the condo no longer exists or the LLC does not have any assets therefore the owners of condos cannot be financially compensated for the demages.
That's what I am talking about.
If a builder would commit outright fraud, a llc with an umbrella policy would not be enough protection. the liability insurance that i carry is if someone trips and falls on one of my properties.
To set them up for the sole purpose of comitting fraud would definitely be unethical. To set them up to obtain the most effective protection is simply utilizing the system that exists. There are likely many more "bogus" claims against those with "deep pockets" as there are contractors operating fraudulently. Just my opinion.
Happy Thanksgiving!
Tim
I agree, Tim. From what I gather as a layman, the layers make it more difficult to file bogus claims. Just because you've set up trusts and llcs doesn't necessarily make you bulletproof. Any good lawyer can penetrate, I think. The idea is to discourage frivolous suits, because everyone knows all landlords are "rich". My concern is the additional layer afforded by the llc, relative to the reduction of liability exposure. I'm beginning to think an llc is worth it.
No doubt. I equate it to insurance...you pay for it, but really don"t want to use it!
