John T reed prefers sole proprietorships to LLCs

[Ashan D]

Hi,

I was under the belief that LLCs or S corps were good entities for a real estate business because it separated business activities away from the individual. So effectively, once I could start signing non-recourse loans, I would not be personally liable for a property.

However Reed says that this is generally not true and argues that LLCs generally do not protect you:

Conclusion:

The sole proprietorship is generally best for real estate investors. LLCs are probably better than limited partnerships or S corporations. But the notion that LLCs protect you from lawsuits is quite misleading. It generally takes a balance sheet that takes advantage of favorable state bankruptcy exemptions and pension laws to protect you from lawsuit judgments.

Has anyone ever encountered this? I thought "non-recourse" was pretty strightforward, maybe not?