New LLC

[Mohan Dag]

Hi, I have an IT business (LLC) that I use for consulting work. Now I have purchase contract for a Multifamily for which I am taking a commercial loan. Should I start out a new LLC to put the title on or use the existing LLC that I do business with. Seeking out advice here.

[Jenifer Levini]

Hi @Mohan Dag, the answer to your question depends on a couple of things. (I'm an attorney so that is the standard answer to all questions.) First it depends on the value of your consulting business. One of the main reasons people create a separate entity (LLC) is to shield their assets. If the consulting business has a high value then it becomes vulnerable if its held in the same LLC. For example, if a plumber comes to your multifamily and messes up the gas line and the place explodes. Then all the tenants sue the LLC, the asset they will go after is the consulting business and its bank accounts and whatever else it has of value. Now if the consulting business has little value, then there isnt much to lose. But if it is worth millions, then you could lose it all.

The second consideration is the operating agreement and members. If youre the only member then you can simply rewrite the operating agreement to incorporate the new asset and the role in managing it. If there are multiple members then you'll have to follow the voting rules in the operating agreement to make the decision.

Lastly, the bank that is making your loan may have a policy. Its probably a good idea to check with them.

Jen