Asset Protection

[Mark Smith]

I am about to jump into my first deal, but I have been trying to learn as much as I can about asset protection.  I really don't want to get myself into any trouble, so I'd rather be safe than sorry.

I'm thinking about forming an LLC. From what I understand, the best thing to do is form an LLC for each property. I'm wondering what the tax consequences are of having an LLC. And what happens someday when I have 25 properties? That seems like it would be a really expensive tax season when it comes to paying to file returns.

I have also thought about an umbrella insurance policy, however the point was brought up to me that "if one of your tenants eats a chip of lead paint, a $1,000,000 policy may not go very far."  So now I'm not sure.

So the basic question is, what is the best, most cost effective form of asset protection?  I'm willing to pay a little more for good protection, but I don't want it to ruin the potential cash flow of the property.

Thank you!

[Mark Smith]

Thank you for your input!  I am using several sources to try to figure out the best plan for me.  Luckily, my mother is a paralegal so she has access to attorneys, I work for a public accounting firm so I can figure out the tax consequences, my realtor is an investor himself so I'm waiting on his thoughts, and then of course is the BiggerPockets community.  I'm thinking with all of those lines in the water I should be able to come to some sort of conclusion!