LLC Creation Advice

[Andrew Burrell]

Hey BP community,

I am an investor with two single family properties in Northwest Arkansas. I currently have these homes in my personal name, but have been debating whether or not to create an LLC for these rentals.

I am in no rush to do this, and I have heard the argument both ways on leaving them in my personal name vs forming an entity, so I am looking for any advice the community may have. I do look to grow beyond two properties, but not necessarily at a rapid pace.

Finally, if I were to do this, what are the proper steps in forming an LLC and then transferring them into that entity? I've seen different things out there regarding best practices.

I would appreciate any advice on this.
Thank you!

[Stuart Udis]

@Nathan Gesner You say you can't be traced but do you have mortgages on your properties? Can't someone review any recorded instruments associated with your properties and see who signed on behalf of the LLC? Can't they also review the deed in which you transfer title from your name to the LLC for a nominal amount which similarly is a recorded instrument and is a telltale sign the owner has changed in title only? Also, if a claim were to be filed won't the identity of the member(s) be determined through the discovery process? I've never heard of an instance where a registered agent sits in for a deposition or answers interrogatories…. I believe it's important to clarify your comment. Is it more difficult to trace you as the owner? Perhaps. But yes, you can still be traced.

Also, how does this anonymity strategy prevent a claim from being filed in the event a liability event were to exist? It doesn't. I believe it's important to address these two items separately: First, there are still ways to find out the identify of the member(s) behind the LLC and secondly these anonymity strategies do not actually shield liability because claims are still brought regardless of whether the members of the LLC are identifiable. It's important to clarify these two items because there are people who pursue these strategies with unreasonable expectations of anonymity and liability protection.

I do however agree with you that there’s no one size fits all approach and depending on the type of business that’s operated and location, the correct strategy may vary.