LLC on two different properties with different partners?

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You own 50/50 with your brother. Is it working? What compels you to move it into an LLC? Read my basic LLC advice below and then talk to your CPA, attorney, and do your own research to see if it's the right move for you.An LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted. Warning: I am not an attorney and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation. ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appears on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own. LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets. Additional thoughts: 1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc. 2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account. 3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less. 4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your basic insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits. 5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 12 years experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is likely to be higher, then you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require additional, on-going effort to maintain.

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Joseph,From an insurance perspective, the change to an LLC may or may not impact your premium. If the Insurance company you currently use will not insure the LLC, you should find out the new premium. That would be an expense that you need to factor in. I would also ask if the LLC owning multiple properties would impact the coverage and rate.

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Since you have two different Partnerships for these two properties, you can either leave them in your names which is a perfectly valid route, or you can set up an entity for each property. That entity does not have to be an llc. I have used a general partnership on a couple Partnerships because the taxes and fees are way less in my state. It saves a couple thousand a year. if you do decide to set up an LLC for both, keep in mind it's probably not going to be as effective as you think it will. A lawyer can probably easily Pierce these since the previous owner is immediately prior on the title chain and most people don't operate their LLCs perfectly in order to make the shell unpiercable. For example, if you commingle funds at all, the rest of your assets may be up for grabs in a lawsuit. I think new investors get obsessed with llc's way too much and bury their heads in the details instead of making profit and building wealth. But if you must set them up, then yes it is possible for you to have your own LLC to represent your ownership in each partnership. It seems pretty unnecessary to me to do this, I would wonder what your goals are and reasons are for doing that. It's a bit excessive, though I have done it in one of my partnerships. But that was just because I already had the LLC for my builds and flips.

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Congrats on growing the portfolio. If you try to swap the houses you own into the LLC you are going to have to pay for closing costs again. Your portfolio is still small so just get a larger insurance policy vs putting the houses in an LLC. If your lender will allow you to close in an LLC then do it but most don't. Hope this helps.