Form an LLC.....Yes? No? Maybe?

[Jeff Bisgier]

Hi Folks,

I was hoping not to have to write an new post about forming an LLC as there are tons of them on BP, but after reading through so many forum posts and reading articles on both BP and other websites, I'm more stumped than ever. For every 50 people who say "You have to form an LLC if you own rental properties", there's another 50 who say, "No, just get a good umbrella policy".

Here's my situation........My wife and I purchased a single family home in NY a year and a half ago and have been fixing it up (don't ask why it's taken so long. Many mistakes on my part plus a bad contractor). We paid cash for it. We have our first tenants moving in in 2 weeks. The only other property we own is the house we live in. We may look for another investment property in the future, but not right now.

So my question is, should we form an LLC?

Thanks!!

[Brian Bradley]

@Jeff Bisgier insurance and an umbrella policy will not help you if you are sued. read the fine print. Do insurance companies make money by paying out claims? No. They make money by taking premiums and then challenging claims and partial payments. Even umbrella policies. Basic Business. Otherwise they would not be in business. The point of AP and LLCs is to limit your personal exposure and liability if you were sue. Any AP plan would be tiered and create multiple hurdles. Insurance, as much as you can afford, LLC and a Trust. The key really is the Trust connected to the LLC.

You want nothing in your name. Investors and rich people do not own anything they control it by having it in LLCs and Trusts. They then just get all the benefits of it. Then if some crazy event happens or lawsuit and judgment, you have many hurdles for the plaintiff and lawyer to jump through, and when their lawyers sees their is no money at the end of the road to collect on, then they wont take the case since they won't get paid. That's the point of AP. To let you sleep better. 

Replying only on insurance is foolish and misguided. Just think business 101.