1 LLC per property or 1 LLC + umbrella

[Jonathan Roveto]

Hi all,

I have been getting ready to establish and LLC for my properties. I am curious about 2 options. Do I get 1 LLC and put all 4 properties under it and pull out a 3M umbrella policy or do I do 1 LLC per property and put out maybe a 1M policy each? My concerns are that 1 LLC per property plus an extra policy on each seems like an expensive ordeal. On the other hand, 1 LLC per property shields each property from the others and provides high security.

Obviously, I take everything as risk vs. reward, so I am looking for opinions on this. The latter option provides high amounts of protection, whereas the former might be less expensive and at the least simpler. The former does give me higher exposure, but how likely am I to realize this exposure (getting sued for >$3M or multiple times in a policy period)?

[Richard Balsam]

Remember- if you decide to have multiple LLC's ( I have 5 right now) you MUST keep annual meeting records showing the company is literally alive and breathing- remember - you are creating a separate entity than yourself to protect your own assets.

Therefore, each year, you must hold an annual meeting and write from each of the LLC's as if each one is run by different people (even though it is yourself only) and review the previous year and what your company wishes to happen next year. Do this for each LLC. If you do not - and there is a problem or lawsuit, etc - a judge may pierce the corporate veil since the LLC is not technically a living thing- but just a shell ( nothing happening, no usual business practice of annual meetings, etc). There is more to setting up the LLC than the initial paperwork and forgetting about it. Also...there is the annual filing fee for the company renewal. It's $50 per year per LLC in Georgia.

As for dollar amounts in each - depends on the individual and risk level. To alleviate all risks, there is something called commercial insurance - designed to protect if you get sued with real estate. The LLC protects your assets from being sued against, since it's name is on the title. The insurance protects you and the LLC from any asset being lost in a lawsuit - and much more. For example, I keep $1MM policy on every home, and an umbrella policy to protect for another few million just in case. Was sued 13 years ago- they fell down the stairs in a 4 year old house. It somehow was my fault. Enter insurance. They sued for $500K - (never will happen in my county) - but his brother worked for a law firm in downtown Atlanta - looking for a payout. They immediately settled for $9,750 a figure made up by the attorney provided free by my insurance company. They never even counter offered - just ran with the cash- since it was a game to them ( they even had the nerve to tell me they want to do what I'm doing and they found a home already). I never paid a dime. Insurance knew I would win the case- but it would cost double just to bring to trial - like they said-a case of "win the battle, lose the war". So- they settled. No increase in premiums either. Earlier this year- had to replace a roof. Turns out, there was hail damage - and insurance paid for the entire roof. First claim in 14 years with them. Saved me $7K on that one.

Just make sure you have proper insurance and you'll be fine, assuming your LLC is set up and run properly, and you don't do anything to provoke them into suing. If they say something is wrong with the house- make sure it is fixed ASAP- and keep your tenants happy. They pay your bills, and pay down your loans - the least you can do is be a business-person and do what's right.