Minnesota Series LLC vs Holding Company

[Benjamin Barnard]

I'm just starting to get behind the idea of investing in buy and hold real estate in MN and I am looking to form an LLC. As I want to structure it in a way that allows for easy growth, I'm looking at either a Series LLC or having individual LLCs with a holding company above. Ultimately, I'm looking for the safest vehicle for my properties.

It looks like Minnesota does have a Series LLC but my understanding is that it does not offer the same protections as a holding company would provide. Although it is a few years old, this article from 2015 (http://www.fortenberrylaw.com/states-series-llc-acts-recognize-series-llcs/) says the limited liability of a series is not recognized. In another article, (https://www.dunncarney.com/2007/06/layering-limited-liability-companies-does-it-enhance-the-liability-shield/) it seems to confirm the same but was structured in a way that I could not tell if that was only in the case of wrongful conduct.

If any of my information seems to be incorrect or misinformed let me know so I can correct my understanding. If there is other information that is needed let me know and I will provide it to the best of my ability.

[John Woodrich]

I agree with many comments on here. I haven't come across a case where a renal property took someone down but the cost of setting up an LLC is negligible when you consider the cost of purchasing real estate. In most cases we help set them up for $300-$350 which includes the MN SOS fee, Fed ID number, and a little consulting time. If you do it yourself the sate filing fee is only $155. Many people look at it as a cheap insurance policy whether it works or not. An umbrella policy may be best if you have multiple properties. It is an added cost but it will be partially offset by the reduction in individual policy rates.

@Tim Swierczek many would argue that if you have more equity you have more to lose with a property. In that instance you should probably have more insurance or setup stronger liability protection as you have more to lose than someone who has little skin in the game. Also holding all of your properties in the same LLC puts all of them at risk if you have a problem with one of them... Simply setting up a parent company with subsidiary LLCs could provide some additional protection and allow you to send the bank the same financials they are used to seeing. If you setup the parent/sub structure and commingle funds between entities it may question whether you have actual liability protection but in a lawsuit I would rather say that the LLC only owned one property than have to give them a list of assets containing many others. I say this from an advisor standpoint - I currently do not have all of my properties in LLCs. But I also don't have insurance on all of my houses as well.