Starting up an LLC

[Kweku Ocran]

I read somewhere that I should see an insurance agent before I start my LLC? Can I get some feedback on this statement. With VA in phase-2 of coronavirus I'm ready to speak with someone.

[Lucas Miles]

@Kweku Ocran I'm guessing that advice was related to how a good insurance policy should cover expenses that come from a potential lawsuit, and therefore an LLC is not needed. A correctly formed and operated LLC should provide 2 forms of protection:

1. Inside protection - If a tenant (I'm assuming we are talking Tenant to Landlord situation here) sues your LLC, your personal assets should be protected.

2. Outside protection - If you personally get sued (from a car accident or something) the assets in your LLC should be protected.

A good insurance policy should cover most situations regarding inside protection, but will not provide any outside protection. An insurance should cover you in most situations if you get sued by a Tenant, but who knows. Forming an LLC gives you an extra layer of protection.

It also comes down to your risk level and what you have to lose. If you buy a property for 100k with cash you could effectively lost 100k, vs if you purchase a property with a owner occupied 3.5% FHA loan (3.5% down payment) you have a lot less to lose, so maybe an LLC isn't worthwhile.