LLC or Umbrella policy

[Aaron Dyson]

I am new to real estate investing, and will soon be purchasing a duplex with a partner. I was just wanting to find out what the pros and cons are for getting an LLC vs and Umbrella Liabillity Policy

[Mike S.]

Both are two different tools of asset protection that are not exclusive.

Liability insurance covers you financially up to the policy limit (if the insurance does not deny you coverage based on their many exclusion clauses).

LLC are used to insulate your assets in different boxes to avoid propagation of liability from one box to the other. It protects your private assets from the LLC liabilities (if you are not directly involved in the faulty/criminal behavior that created the liability to start with), and protects the LLC assets from your own personal liability (if your LLC is from a good charging order protection state).

In the case of investment with a partner however, the LLC seems a must to me as you don't want to be liable for something that could happen in your partner's life. Its operating aggreement also, will stipulate how your partnership is setup, how it will function and how you will get money out.