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Updated almost 3 years ago on . Most recent reply

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41
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Andy Wilson
4
Votes |
41
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LLC for asset protection

Andy Wilson
Posted

Hi

I learned that forming LLC is important for asset protection for rental properties. I already made LLC for my rental property But my CPA insists to get rid of LLC as it just adds more costs and doesn't really protect me because we already have landlord's insurance. How important is it to form LLC for rental properties. I only have two rental properties but plan to expand more in the future.

How important is it to form LLC for asset protection for rental properties?

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220
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83
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Megan Templeton
  • Attorney
  • Birmingham, AL
83
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220
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Megan Templeton
  • Attorney
  • Birmingham, AL
Replied

Hi there! I would definetly recommend working through an LLC for your properties. Stats say that if you are an investor for more than 10+ years, you have a 90% chance of being sued at some point. For long term investors, its not so muh of if you will be sued, but when. While insurance is a good first line of defense, it is not conclusive. Insurance companies are a business and inside of that looking to mitigate costs. In doing so, they will often find reasons to not pay out on a claim. If thats the case for you, you want a true line of defense in a lawsuit - thats where an LLC comes in. An LLC separates you from your business so that if your are sued, your personal assets arent at risk. There are always ways to mitigate business liability by seperating out assets (you have touched on this with a series LLC). Using an LLC not only provides liability protection but can open up opportunities for you for working with 3rd parties such as lenders or partners who require an LLC. If your LLC is set up correctly, the operations and financial pieces of it can be minimal and easy to manage.

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