LLC's And The Money Flowing Through Them
Okay, I've been convinced to form an LLC for each of my rental properties and deed each property into their own LLC where I am the sole member. I understand that this provides liability and asset protection to me personally. My question is this - do I have to have a separate bank account for each LLC or may I continue to use a checking account (currently I just have a personal account) to deposit rents and pay bills on the properties? I'd like the protection of the LLC but it seems like you'd be co-mingling funds if you had just one account ....
Gracias,
Chance
Do not co-mingle accounts. Definitely open up a seperate account for your LLC(s)...
If you co-mingle accounts there will be no liability or asset protection for you personally!
I can't stress this enough!
Good Luck!
[addsig]
Why are you forming an LLC for each?. The protection is the same with your main business LLC. Purchase as an entity (LLC) with your credit secured. As far as asset protection, transfering your properties via land trust under your LLC would work. William Bronchik has a brilliant book out about asset protection as well as writings on the land trust as well..Good luck
Regards-Pat
I guess my question is why wouldn't I form an LLC for each house? If I put every house in the same LLC they can reach every house under the LLC, right? For example, if I have an LLC with 10 properties in it, and I get sued by one of the tenants in one of those 10 properties and lose, they can get a judgment against all 10 properties. If I have a separate LLC for each, they can only touch the one they are suing, right?
Thanks ... great info on this post so far.
Chance,
Minimizing the assets that are in one specific LLC does draw a line as to what assets are exposed. If might turn out that the LLC does not stop a judgment from being attached to you if the LLC is pieced.
Now, if you are mostly looking for asset protection you should definitely include insurance in the mix. You can get a umbrella liability policy for 1 million (or more) for a very reasonable amount of money. This way if there is a loss the insurance company pays first.
If you used a lawyer to get the LLC set up have them explain what you need to do in general to operate the LLC so that it will not easily be pieced.
John
[addsig]
I understand that the LLC may be pierced, but my understanding is that really will only happen when I have been negligent or have failed to comply with the LLC rules in my state.
I have 1 million in umbrella and 1 million on each property (essentially 2 mill on each property) so that is how I have been mitigating my risk over the past few years... recently I was in a conversation where an attorney who I respect very much said I should do the LLC anyway because it will (might?) discourage lawyers who have one of my tenants come to their door wanting to sue me. The general idea he said was that the more layers of protection, the less likely an attorney is to file a suit. Easy targets, however, lawyers love.
Thoughts? Good conversation all!
Chance
Quote:
On 2004-07-08 16:52, chancebunger wrote:
I guess my question is why wouldn't I form an LLC for each house?
I have heard that this is exactly what you are suppose to do from another investor. Every time he and his partner buy a place to flip or rehab or rent out, they start a new LLC.
My question to you all is, do you and your partners secure your money from each of your respective lenders, then buy the property, then quit claim the title and deed over to the LLC? Or do you all secure your lenders money and put it into the LLC which in turn "buys" the property?
What I understand is that you can title the property either way - either during the buying process or after. Some people I've read out here say to be careful about doing it after because this may trigger a loan's "due on sale clause." I don't think that is reality. My mortgage lender at 5/3 bank told me that they don't care if you quitclaim to an LLC since they still have your personal guarantee. My attorney said also that some banks have told him they COULD pull their due on sale clause, but in reality they wouldn't do that (it would cost them money, and since they are still secured they don't care). So my strategy is to buy and then transfer to the LLC with me as the sole member.