LLC Confusion in Florida!

[Lari A.]

Hello BP Community,

I've been reading the BP forums (and others) regarding forming LLCs, and oftentimes the information in one post/article negates what's in the next. My confusion lies in the varying information concerning the rates, states, and methods of forming an LLC. One BP poster even stated that he forms an LLC for every transaction that he does! (See below. He was telling another poster to not deal with an attorney who wanted to charge $1,000 to form an LLC).

Originally posted by @Kevin Costello:

Run from that attorney. I do a new entity for every transaction. I did one this week that cost me $350 and came with a simple operating agreement and a seal for the llc.

I'm more confused than before, because I was under the impression that one LLC protects you from litigation on all of the deals that you do under that LLC.

I've read that incorporating in Delaware or Nevada is advantageous, but that there are disadvantages of incorporating in a state that you don't reside in. I've also been told that forming my LLC in Florida (my home state) will turn out to be costly over time, because of the annual fees.

I'm an individual who will be working alone as I build and develop my real estate business. I have yet to pull down a deal, but I want to form an LLC to take advantage of transactional funding that is available to me (up to $750k per deal at a very good rate). I know that nothing's "simple", but I simply want to form an LLC that will cover me for the next several years as I develop my real estate investing business, that won't cost me exorbitant annual fees, and that won't require me plunking down thousands of dollars for an attorney's advice (which I don't have anyway).

Can anyone offer any solid 1-2-3 guidance on how I should proceed in forming my LLC in my home state of Florida, or elsewhere?

Many thanks!

[Amanda Davis]

The reason why some people form an LLC for every transaction, is because they want to minimize the risk for their other properties. For example, let's say a tenant successfully sues your LLC and get a 200,000 dollar judgment. If the only asset you have in that LLC is the property X, which you have 35,000 dollar equity, then your other assets and rental portfolio would be may be safe because they are not an asset of that LLC. This sometimes is advantageous but not in every situation. Also, forming a separate LLC for every property is not the only way to protect your real estate portfolio and can be very cumbersome. And if not done properly, will not offer any additional protection.

But if you want to know which entity is best for you and works well in your State, you need to contact a real estate attorney. If you can't get an recommendation you should contact your local Bar association and they should be able to give you a reference.