Series LLC or Wyoming Holding Company?

Question

Hi to all,

I had a consultation from a referred lawyer (here on BiggerPockets) a couple of days ago. The Youtube videos and a few reviews were excellent.. but the person that I had as an advisor was a "presenter" not a lawyer... I emailed him several questions the day before and confirmed that he received all the questions with him via email... he had plenty of time to get the answers... he said that all my questions will be answered during his presentation... well I was VERY disappointed. The presentation gave me the same information that I found on this forum and others, and several youtube videos... what a wast of money ($150). The only new information was the "packages" that they offered... overpriced IMO.

So im going to ask members your opinion.

We have a few properties in 2 estates, we live in one of this estates.

Should we...

1- Open a Series LLC, then a Land trust to "mask the owner ship of it", then open child series, open another Land trust, deed one property to it and do the same for every child series? This was suggested by the company that offered the consultation.

2- Open a holding LLC in Wyoming, then open one LLC per property and deed one property to each one... all LLCs will be owned by the Wyoming LLC.This is the setup suggested by another company.

This is a basic explanation... but is a complex thing to explain in writing... it would be easier if I can draw it. :)

Thank you for your help and suggestions.

Costin I. · Answer

@Carlos C. - not a lawyer, so none of this should be construed as legal advice, just ramblings to be taken with a big grain of salt:

1. There is no absolute answer and unique tool/strategy in anything real estate. You need to learn how and when to use all the tools available to you (financing, insurance, management, etc.) and to understand how they fit together in your toolbox, as none will give you everything (e.g, insurance is required and it will cover you for many situations, but not always; asset protection (LLC) is litigation insurance and complements regular insurance, by minimizing the target and making it unappealing).

2. Asset protection is a form of insurance – insurance against litigation. My recommendation would be to apply the "2% rule" - the cost of setting up and maintaining your asset protection should be less than 2% of equity you are trying to protect. Let's say, it costs you 1.5K to get your structures in place (holding LLC or Series-LLC, with or without land trusts, with or without separate operations LLC) and 0.5K per year (for maintaining the LLC properly, bookkeeping, lawyer and CPA, etc.) for a total of 2K. You should have 100K or more in equity to protect before it makes sense to spend that money - compare that with how much you spend in annual insurance for the same property/equity under the same FEAR principle (False Evidence Appearing Real... or what if's).

3. ABA is more of a subscription service, set up for a maximum gravitational pull - meaning once they capture you in their "orbit" you will be required to pay regularly and more and more for continuation of services. It's far from a one time deal - think timeshare, easy and exciting to get in, hard to get out.

4. If you are new to REI you should be primarily concerned with finding good deals and growing your business first. I would not suggest to look into establishing LLCs and asset protection strategies till you have at least $100-300K in equity (!) and only after you covered properly the "other" aspects of risk management (insurance, umbrella insurance, proper property management, etc.).

Unless you are doing flipping (or AirBnb), in which case I suggest you look into Series-LLC and you operate each flip in its own child-series (if not clear why, ask for more details).

Personally, since AssPro is not cheap, I spent numerous hours researching from multiple sources the whole LLC question and asset protection matter and all the rabbit holes it opens. I gathered all my notes in a 50+ pages document touching on formation and maintenance of LLC and business structures, transferring assets, protection strategies, trusts, anonymity, insurance, levels of protection, etc. including when you should do it, how many properties per LLC, due on sale clause, selecting an attorney, fees, checklists and resource materials + some diagrams to help you in decisional flow.

Doc:  https://www.biggerpockets.com/files/user/CosIorg/file/tritoriam-file

Asset Protection Decision Diagram - to help assess the need for asset protection, and what to implement :   https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-decision-diagram

Asset Protection Onion Diagram - what, when and at what cost one should implement in terms of asset protection  - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-onion-diagram-v2

What is needed for a complete asset protection OR the domains that need to be intersected to find asset protection.  - https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-spectrum-diagram

How a fully implemented asset protection layout might look. -  https://www.biggerpockets.com/files/user/CosIorg/file/asset-protection-structures

Let me know if have questions or want to chat further - I can give you my investor perspective.

Thanks

Costin

PS.  Read this book first -  https://www.amazon.com/Every-Landlords-Property-Protection-Guide/dp/1413307000 - before getting into more complicated and expensive measures of protection.

John T. · Answer

@Carlos C. You only have two (2) properties.  You're spending entirely too much time and energy trying to mask ownership of two properties and shield yourself from personal liability.  In all reasonable probability none of the plans suggested to you by the "lawyer in a box" will actually work.

Schedule an office appointment with a local "real" attorney for entity formation (if necessary) and asset protection.  Hire a CPA to help with accounting tax filings.  Get an insurance agent to advise you on Landlord's insurance, Umbrella insurance and Renter's Insurance.

Stanly Malkov · Answer

Great information! Thank you for putting it all together.

Adianice C. · Answer

I too was being sold by them (Anderson advisors) to do the same.. made me distrust them.. the consult was free..

Lisa Singer · Answer

I had a similar conversation yesterday with a consultant at Anderson Business Advisors. He recommended setting up a Wyoming holding company and run all properties through an LLC owned by the holding company. The advisor I spoke to was helpful but pushed his "platinum membership" to provide unlimited consultation sessions. Not sure if this would be worth it for me at this time.

Carlos C. · Answer

The main idea of posting here is to see if other members have a similar setup as I have described above. I know that I have to spend money.. my complaint was that I spent $150 for the same information that I found online...  a waste of $150 by a so called attorney.

My goal right now is to seek the advise from other members and determine if the setup that some of these "gurus" are suggesting are worth the fee.

It looks like most of these attorneys make more money collecting the so called "consultation fee" than actually setting up the suggested structures... most of the ones that I have researched have overpriced packages fee and overkilled structures... expensive to setup and maintain in compliance with the states involved.

Thanks.

Greg Scott · Answer

Some times you get what you pay for.

I recommend finding a good estate planning attorney and pay them for advice customized to your specific situation.

Series LLC or Wyoming Holding Company?

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