Dissolve LLC or change name?

Question

Hi all.  I have a Wyoming LLC I created to buy a specific property.  I ultimately did not close.  I want to use this LLC but I do not want to keep the name. It will still be doing real estate activities. I have a D&B account associated with it, a bank account(I will be moving to another bank at some point in the next few months), and I have a business credit card.

Should I dissolve the LLC, or change the name? In the future, I could see how a savvy person bent on finding me might be helped along by following the crumbs left by an old name. I do not expect this will happen as, but it's a possibility nonetheless.

Thoughts?

Mike Dawson · Answer

It does sound better to just change the name, and being identified isn't much of a concern.  I use an RA and a llc formation company, which left my name off the documents.  Plus it's cheaper at only $60 to change the name. Thanks!

Nathan Gesner · Answer

An LLC is useful for two things: anonymity and legal protection. In most cases, neither is warranted.

Warning: I am not an attorney, and this can be a complicated topic. Please note the information provided below is a layman's definition designed to provide a basic understanding for the general audience. You should consult an attorney or CPA for your specific situation.

ANONYMITY: When you create the LLC, your name is recorded on the documents and published on the Secretary of State's website for all to see. So you're not completely anonymous. If you want to be completely anonymous, you can use a Registered Agent. The Registered Agent will record the documents on your behalf so only their name and information appear on the documents. I've done this with my properties because I'm well known in my small town and don't want people to know what I own.

LEGAL PROTECTION: By placing your assets in an LLC, you are legally separating them from your personal assets. If someone injures themselves and sues, they will be suing the LLC and not you personally. If your insurance coverage isn't enough, they could seize the LLC assets, but not your personal assets.

Additional thoughts:

1. An LLC is not free. You can spend as little as $100 to form an LLC, or you could use an attorney and spend $1,000 or more. There are also additional costs of operating and maintaining an LLC, like separate bank accounts, annual report filings, tax filings, etc.

2. There are rules to follow! If you fail to follow the rules, you may open your personal assets to a lawsuit. An example of this would be mixing your personal money and LLC money in the same bank account.

3. You do not need a separate LLC for each property or a series LLC! Don't make your life more complicated than it has to be. Most professionals will recommend a separate LLC for every $1 million in assets but I don't think that's necessary. In my case, I have residential rentals in one LLC, commercial properties in another, self storage in a third, and my real estate company operates in a fourth. Some have more than $1 million in equity while others have less.

4. The need for an LLC is grossly exaggerated on BiggerPockets and other websites. Have you ever heard of a Landlord being sued by a Tenant and losing property? I've been on this board since 2010 and haven't found an example yet. You've probably heard of big Landlords losing property, but only because they were flagrantly violating Fair Housing, running a slum, or otherwise violating the law in an egregious manner. You are more likely to be struck by lightning twice. The vast majority of lawsuits against Landlords are for wrongful eviction, security deposit disputes, and Fair Housing Violations. Your primary insurance policy with $300,000 in liability coverage should be sufficient in 99.999% of all lawsuits.

5. The best protection for you and your investments? Know and obey the law. I manage around 400 rentals with 14 years of experience and have never been sued once. Even if I were sued, I document everything and obey the law, so I won't be found guilty. Even if I were found guilty, the cost would be in the thousands, not in the millions. Insurance would cover it, I would pay the deductible, and no assets would be lost.If you are in an area like San Diego where people are more likely to sue, a judge is more likely to find you guilty, and the payout is expected to be higher, you may consider an umbrella insurance policy. This policy will provide additional coverage above what your existing policy covers. It's easy to obtain, costs very little, and doesn't require extra, on-going effort to maintain.

Drago Stanimirovic · Answer

You don't need to dissolve the LLC, changing the name is a simpler option. By changing the name, you retain the benefits of your existing LLC, including the D&B account, bank account, and business credit card. Dissolving the LLC would require starting over with a new entity, which can be more time-consuming and may reset any business credit you've already established.

To change the name, you can file an amendment with the Wyoming Secretary of State, which is straightforward and keeps the LLC intact while giving you a fresh identity. As for privacy concerns, changing the name and being mindful of future registrations or public filings can help minimize the "breadcrumb trail."

If you're still worried about being traced, consult with an attorney about structuring your LLC or using a registered agent for added privacy.

Let me know if you need help with financing or have more questions!

Best,

Drago

Ashish Acharya · Answer

If you want to keep the existing bank accounts, business credit, and D&B account associated with your LLC, it's simpler to change the LLC's name rather than dissolve it and start over. Changing the name allows you to retain all the current accounts and credit history while ensuring the LLC reflects your new purpose.

If you're concerned about privacy, consider changing the name while also updating any public records to reduce the chance of someone tracing the LLC back to its original purpose. Dissolving the LLC would require starting from scratch, which may not be necessary if your main concern is the name itself.

Dissolve LLC or change name?

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