@Michael Evans took the words out of my mouth and is spot on. Land trusts holding each property individually with a few LLC's spread out as beneficiaries works wonderfully since they are completely private. Once you get educated on trusts you will never use anything else (as your 1st level of ownership). @Calvin Ruth what good is a million in umbrella coverage when you get sued for 6 million? Insurance without legal entity protection is worthless.

@Calvin Ruth I was thinking the same thing Calvin, but don't forget to take the vacation with what you have saved in time, attorneys fees, yearly LLC fees, additional bookkeeping fees, additional insurance costs, more, more.

@Christopher Poirier, if you are doing flips you need to look into the Subchapter S election either for a corporation or one of your LLCs. There is a huge tax difference as @Alan G. pointed out. It could easily make a difference of 15% in your final tax payments.I would also be careful about setting up too many separate entities as each will come with special reporting or filing requirements. I would not go the land trust route without talking to a local attorney. The rules on trusts and how you can benefit from them vary from state to state, just like LLC rules do. You also need to be careful about transferring assets willy nilly between different entities without fair compensation. This could be used to pierce the veil of your corporate entity and bring personal liability. Be very sure to talk to your accountant and have a plan in place before tax time.

You can also use another LLC to strip the equity out of each property so that it looks like the property has a mortgage against it when someone runs a title search.

Put each of your properties in their own respective land trust and put your LLC as the beneficiary. Use an attorney as the trustee or another LLC that sounds like a property management company. No one can determine the beneficiary of the trust as the trust document is not a public document.

@Christopher Poirier. @Natalie Kolodij is exactly right. You never want to subject all of your assets to levy or foreclosure in the event that there is an issue at one of them. If a contractor or a neighbor or investor on another project, a contract purchaser, a partner, or the town, etc. etc. sues your LLC and it's a site-specific LLC (with few exceptions, of course fraud being one), as long as you maintain a separate bank account and hold each property's LLC out as its own entity, then if a judgment is rendered against you, it can only be collected against that single property, not all of them. Because flips are inherently risky business with the time constraints, and work going on at the property, etc., I would always suggest separate LLCs. Even if your current LLC is the sole member of each one so that the property-specific entities are disregarded entities to make taxation and record keeping a little bit easier on you and your accountant, the multiple LLCs offer great protection at not too great a cost.

Any thing in an LLC together can be at risk in the event of litigation. I would discuss the structuring with a lawyer but I wouldn't keep a portfolio of buy/hold and my flips in the same LLC.

Thank you everyone for the feed back.

Just make sure you have at least a million dollar liability umbrella policy that covers all your properties. You should be fine with that.

Christopher , You should talk to not only your attorney but your accountant on this. Long term holds and short term flips are taxed different and should be kept separate. Again, talk to the pros.

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Christopher PoirierPoster

Real Estate Investor
Fort Worth, TX

Starting Out

need separate LLC's?

Christopher PoirierPoster

Real Estate Investor
Fort Worth, TX

Posted December 19, 2016 14:05

I hold rental properties in an LLC, I will be filping houses pretty soon and want to put the flips in an LLC. Is there any reason i should not use my current LLC to hold the flips?

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