Totally lost on creating LLC

[Nate Fanara]

Hello,

I currently have 1 rental property (this may go up very soon) located in Ohio, I live in AZ. I have done a lot of reading about the benefits of an LLC. My main reasons for wanting one are the protection it provides and to keep my Debt to Income Ratio balanced, but i have no clue where to start. I've read that NV and DE are great places to create the LLC but i do not fully understand the benefits/draw back of doing this. I have decided i would rather speak with a real estate attorney than trying to guess on my own, but do i speak with an AZ attorney or OH, and does anyone have any recommendations?

Thanks

[Steve Hall]

Wow! Lot's of misinformation here. Let me try to explain why you MUST have an LLC.

If you are a sole-proprietor (No LLC) and a tenant gets killed because of a faulty oven in your SFH rental, their estate/heirs will sue you for $10 million or more! They will take your rental, they will take all the money in your personal accounts, savings accounts, IRA's and 401k. They will take your vehicles, and then, depending on your state's homestead laws, they can take your personal residence. They will get a judgment against you for the rest. They will use Writ of Attachments and garnish your wages and you will work the rest of your life to pay them.

It the property were owned by an LLC, they could only sue the LLC and most likely all they could take is your SFH rental. (Assuming you do everything correctly and do not allow the corporate veil to be pierced.)

Here is another scenario where the LLC will help protect you:

If you are a sole-proprietor (no LLC) and a UPS driver slips on the wet lawn of your personal residence, hits his head on a rock and dies, his estate/heirs will sue you for $10 million or more! They will take all the money in your personal accounts, savings accounts, IRA's and 401k. They will take your vehicles, and then, depending on your state's homestead laws, they can take your personal residence. You know the rest. What you may have noticed is that they cannot take your SFH rental because the LLC owns it!

If the property were owned by an LLC, they could only sue you personally for your liability and most likely, all they could take is your personal stuff. (Still bad, but imagine if you had 50 rentals like @Arlan Potter. He would have lost all 50 of his properties!).

Sure insurance is great, but what if your policy was only $2 million max and you're sued for 10 million?

I recommend that you put your personal residence and other personal assets in trusts and LLCs as well. The reason you might use a Wyoming LLC or Nevada LLC to own an LLC in your own state is for anonymity. If someone wants to sue you, they'll never find everything you own.

@Stanley Bronstein posted that you are required to register your out-of-state LLC. This is NOT true for all states. Be sure to check with your state to see if this applies to you, and your particular situation.