Regarding forming an LLC for multi-units

[Nav Madhwan]

If you have a few multi-plexes (4 units), is it good to have ONE LLC and have those multi-plexes under that LLC? Is LLC for commercial units (4+)? Getting an umbrella policy would be cheaper than an LLC for the 4 units? Any advise would help.

Thanks

Nav

[Scott Smith]

Originally posted by @Nav Madhwan:

If you have a few multi-plexes (4 units), is it good to have ONE LLC and have those multi-plexes under that LLC? Is LLC for commercial units (4+)? Getting an umbrella policy would be cheaper than an LLC for the 4 units? Any advise would help.

Thanks

Nav

As people have mentioned above the LLC can be pretty expensive in California. There are many investors from California who use the Delaware Statutory Trust, as this can kill two birds with one stone. The first benefit of the DST is that it is technically an estate planning tool and is not regarded as "doing business" by California, saving you the dreaded CA Franchise Tax (minimum of $800 per year.) The DST functions like an LLC because it separates liability, arguable better, than the LLC - and as an added benefit it also functions in a parent-child relationship allowing for properties' liability to be compartmentalized within the entity, like the Series LLC.

Some investors will operate their companies through an LLC, which caries all the liability for the operations (management, rent collection, contractors, etc.) and just place their properties/assets into the DST. This means that the things that carry the most inherent risk of law suit won't be placing your actual properties at risk. The side functions of the trusts is that you can also set this up to align with your estate plane, whenever you plan on doing that, pretty easily when the time comes.

This is not legal advice, just my opinion as a real estate investor. I spend most of my days working on this type of issue, so feel free to shoot me questions if you have any more.