LLC

[Peter Mckernan]

Hey everyone,

I have a house that I bought last year for a buy and hold investment, and I'm going to purchase one this year with the same investment goal in mind. I was looking into when I should establish a LLC for the investments. I was wondering if everyone can give me some common guidelines they use on placing their rental properties into a LLC (i.e. two houses, three, four). Let me know how you guys view this concept.

Thanks,

Peter

[Marcia Maynard]

There are many BP forums and comments on this topic of LLC. The main themes are:

1. Does an LLC really provide liability protection or not? To what extent. In what circumstances?

2. Can the corporate veil be pierced? Is it likely to be pierced? How to run the LLC so it is less likely to be pierced.

3. Need for additional liability protection, such as an umbrella policy, in any case, whether or not you have an LLC. And avoiding negligence in the first place.

4. Tax advantages and disadvantages to holding a business in an LLC or real estate property in an LLC. Tax preparation and filing.

5. Costs to establishing an LLC and holding an LLC. It is is more cumbersome and costly in some states than others. Do it yourself vs. attorney approach - facts and folly.

6. Creating a business and legally defining how your business will be run. The advantages of an LLC in this regard.

7. Advantages of a formal business arrangement (LLC or other) when in business with partners vs. when you are running your business solo.

8. Death of a partner and the advantages an LLC can provide to avoid the properties needing to go through probate.

9. Buying properties and whether the lender will let you hold the property in the LLC. Transferring properties to an LLC. Quit claim may void the title insurance. Lender may be able to call the loan.

10. The advantage of rental agreements/leases and evictions being done in the name of the business (LLC) vs. an individual owner's name. Whose name will be dragged through court and/or appear on internet sites and property records?

So much to learn... so little time! Read all you can from previous BP posts and other sources. Consider your specific situation. An LLC may or may not be the best choice for you!