Separate Your Children Or Assume All Risk

[Brian Bradley]

The fact is that not all LLCs are the same. Some are just better for asset protection then others. The best LLC structure is the Series LLC. Like any good parent, we want to protect our children. This is accomplished with the Series LLC by isolating each asset into individual series called "children series" for liability purposes inside a holding company, the parent Series LLC. And then we protect our children even more by hiding those children from being connected to the holding company with an anonymity land trust. This system (Series LLC with Anonymity Land Trust) allows you to stop a lawsuit before it is started, by taking away the chance of recovery. Though the Series LLC is one company, with one filing with the state, and one tax return, each child ‘series' is treated as if it were its own LLC for liability protection.

[Jerry W.]

@Brian Bradley, I agree LLCs are a very important asset protection device. I am not as convinced that Trusts by any name that folks slap on them are of much benefit. If you own property and run it through a management company it is almost impossible to pierce it if you do any kind of proper protocol. I see no point in doing a trust where you are so well protected. Now if you are in fact a hands on investor as probably 98% of the folks on BP are using a "blind " trust is practically useless. You are the guy negotiating the purchase, you are the guy signing the closing papers, you are the guy hiring the contractor or even doing the work yourself. You are the guy interviewing the tenant, you are the guy they call if things need repaired, you are the guy negotiating the sale, you are the guy signing the deed, you are the guy writing the checks, etc. To think putting the property into a blind trust will "hide " your identity is absurd. I have had several lawsuits where folks who did wrong tried these little games and it only took a few interrogatories to sort it out and I can assure you it would not remain hidden in a deposition. I am aware of one guy who lied in a federal lawsuit I was involved in, he went to prison AND lost all of the assets. The claim about using a lien to take the equity out of a property is actually the second best way to get the corporate veil pierced in my experience, it is called under capitalization, and fraud. The money you pull out is very easy to trace in the banking world. While I also like the series LLC in theory, the book keeping can be a nightmare for those with a lot of rentals. I only have a little over 30 doors and maybe 5 entities and it is already getting to be a pain to keep them all separated. While Wyoming has the series LLC now we do not have an actual case on them yet. We do have some very strong case law on upholding the LLC shield however. There is actually a fair number of cases on real estate LLCs, although the first LLC in Wyoming was a partnership between two oil companies. I also love how the IRS removed many of the limitations on LLCs about 20 years ago so you no longer have to limit their life to no more than 30 years or meet the 5 bullet test to keep your LLC status. Now in Wyoming even the meeting requirements are pretty much done away with, but not corporations unless you are a limited corporation. I really like limited LLCs. I suspect they are really better than a plain LLC for protecting assets. Thanks for talking about LLcs, I think it is important for folks to have them, unfortunately many have to buy in their own name for the first few properties because of the better terms that personal loans get through things like Fannie May or Freddie Mac.