Why an LLC may not protect you from a Lawsuit

[John Underwood]

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

[Mike Grudzien]

Thank you John!
Mike

[Jay Hinrichs]

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

100% gurantee if you get sued your llc is going to get named and you will get named personally then if you try to argue only the LLC should be sued then thats a separate motion and more money and from what I have seen rarely works.. Unless the LLC clearly has members that are separate from teh manager.  But any person or single member or family your wasting your time with that arguement that only the LLC is liable. At least from what I have seen.. LLC is a tax vehicle Not an asset protection vehicle for single members and or family type lLCs at least from what I see.

[Stuart Udis]

At the end of the day, plaintiff attorney's can name whomever they please in a complaint. A real estate investor is less likely to be named personally if the property is owned by an LLC although that's not a hard and fast rule to live by. Plaintiff's attorneys are normally after the insurance money and they are generally making their decisions on who to name, add or remove from complaints based on that.

Ironically its the investors in the layered LLC's who believe they are hidden in the cloaks of secrecy and better protected who end up in the most costly and drawn out litigation while giving the plaintiff attorneys reason to take a more thorough look under the hood.

Keep your LLC ownership simple, carry appropriate insurance, make sure ever vendor you work with carries appropriate insurance and those who perform work functions most likely to lead to liability exposure list you ad additional insured (not merely certificate holder) and it should go without saying, avoid negligent conduct. If real estate investors perform these tasks consistently, you make the plaintiff's attorneys job far easier because again they are chasing insurance proceeds and you are handing that over on a silver platter in a way where they are far less likely to care about you personally.

[John Underwood]

Also take care of your properties and your tenants (LTR's).

I have had tenants thank me after an eviction because they knew I went above and beyond to make it work and I keep my properties in great states of repair. 

I also do what I say I'm going to do.

[Chris Seveney]

Quote from @John Underwood:

Also take care of your properties and your tenants (LTR's).

I have had tenants thank me after an eviction because they knew I went above and beyond to make it work and I keep my properties in great states of repair. 

I also do what I say I'm going to do.

 100% agree - best way to not get sued is to take do your research upfront on your tenants, take care of the property and be communicative. That will not solve every problem but it solves most. If you do have an entity, treat is like your ex - stay as far away from it personally, do not mix funds and operate it at arms length. 

[Mike Dymski]

I invested for over ten year before I had my first LLC.

[Marcus Auerbach]

Totally agree with your notion @John Underwood. I wanted to find out an asked the question here on BP a year ago if anyone was ever saved by their LLC. 140 replies later, no text book case. But I think there is something to be said about deterring and deflecting.

 https://www.biggerpockets.com/forums/926/topics/1151922-than...

Be a good owner, don't give people a reason to hate you. It takes a lot of energy to sue someone. Run a good business, keep you properties in good repair, have good paperwork. Layer insurance, have a corporate and a personal umbrella. 

And if you get named, respond quickly and through a strong law firm. Like Jordan Peterson says, if you are showing your big teeth, you'll like never have to use them.

[John Underwood]

Quote from @Marcus Auerbach:

Totally agree with your notion @John Underwood. I wanted to find out an asked the question here on BP a year ago if anyone was ever saved by their LLC. 140 replies later, no text book case. But I think there is something to be said about deterring and deflecting.

 https://www.biggerpockets.com/forums/926/topics/1151922-than...

Be a good owner, don't give people a reason to hate you. It takes a lot of energy to sue someone. Run a good business, keep you properties in good repair, have good paperwork. Layer insurance, have a corporate and a personal umbrella. 

And if you get named, respond quickly and through a strong law firm. Like Jordan Peterson says, if you are showing your big teeth, you'll like never have to use them.

 Absolutely!

[Patricia Andriolo-Bull]

Quote from @Jay Hinrichs:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

100% gurantee if you get sued your llc is going to get named and you will get named personally then if you try to argue only the LLC should be sued then thats a separate motion and more money and from what I have seen rarely works.. Unless the LLC clearly has members that are separate from teh manager.  But any person or single member or family your wasting your time with that arguement that only the LLC is liable. At least from what I have seen.. LLC is a tax vehicle Not an asset protection vehicle for single members and or family type lLCs at least from what I see.

Completely agree with the original post but an LLC is NOT a tax vehicle. If done correctly, it is for liability purposes. 

[Andrew Steffens]

I always tell my clients who ask me if they should put in LLC or individual name that it mostly depends on the lending they are using. If they are going traditional then they most likely need to put in their personal name anyways. If DSCR or other business purpose loan they will likely have to put into an LLC anyways. If they are cash I tell them to consult their CPA as it is usually a matter of their taxes. I own both ways. I have also been sued 7 times and so far undefeated.

The most important thing is liability coverage. If someone gets injured on your property it does not matter as long as you are not negligent. In either case, most likely the plaintiff attorney will sue you personally and your LLC. My LLC's have not really provided me much at all in protection. I am sure there are cases it has. If you are a high net worth individual then you likely should consult an asset protection attorney. If you are buying your first (or second or third) mortgaged property you do not have a whole lot to lose going either direction. Just pick a route, get extra liability and focus on growing. Once your net worth is $10M+ then talk to an asset protection attorney, which will focus on trusts over LLC's

[Jay Hinrichs]

Quote from @Patricia Andriolo-Bull:

Quote from @Jay Hinrichs:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

100% gurantee if you get sued your llc is going to get named and you will get named personally then if you try to argue only the LLC should be sued then thats a separate motion and more money and from what I have seen rarely works.. Unless the LLC clearly has members that are separate from teh manager.  But any person or single member or family your wasting your time with that arguement that only the LLC is liable. At least from what I have seen.. LLC is a tax vehicle Not an asset protection vehicle for single members and or family type lLCs at least from what I see.

Completely agree with the original post but an LLC is NOT a tax vehicle. If done correctly, it is for liability purposes. 

it is a tax vehicle as well.. it allows uneven distributions.. You can also recapture loss's in it compared to a C or S corp. so it does have tax planning benefits.

[Patricia Andriolo-Bull]

Quote from @Jay Hinrichs:

Quote from @Patricia Andriolo-Bull:

Quote from @Jay Hinrichs:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

100% gurantee if you get sued your llc is going to get named and you will get named personally then if you try to argue only the LLC should be sued then thats a separate motion and more money and from what I have seen rarely works.. Unless the LLC clearly has members that are separate from teh manager.  But any person or single member or family your wasting your time with that arguement that only the LLC is liable. At least from what I have seen.. LLC is a tax vehicle Not an asset protection vehicle for single members and or family type lLCs at least from what I see.

Completely agree with the original post but an LLC is NOT a tax vehicle. If done correctly, it is for liability purposes. 

it is a tax vehicle as well.. it allows uneven distributions.. You can also recapture loss's in it compared to a C or S corp. so it does have tax planning benefits.

 Only when electing to be treated as a corporation otherwise it is a pass through entity.

[Don Konipol]

Quote from @Stuart Udis:

At the end of the day, plaintiff attorney's can name whomever they please in a complaint. A real estate investor is less likely to be named personally if the property is owned by an LLC although that's not a hard and fast rule to live by. Plaintiff's attorneys are normally after the insurance money and they are generally making their decisions on who to name, add or remove from complaints based on that.

Ironically its the investors in the layered LLC's who believe they are hidden in the cloaks of secrecy and better protected who end up in the most costly and drawn out litigation while giving the plaintiff attorneys reason to take a more thorough look under the hood.

Keep your LLC ownership simple, carry appropriate insurance, make sure ever vendor you work with carries appropriate insurance and those who perform work functions most likely to lead to liability exposure list you ad additional insured (not merely certificate holder) and it should go without saying, avoid negligent conduct. If real estate investors perform these tasks consistently, you make the plaintiff's attorneys job far easier because again they are chasing insurance proceeds and you are handing that over on a silver platter in a way where they are far less likely to care about you personally.

What a great answer! 
That’s why I like Stuart’s posts. 

So, my experience has been that an LLC is a lot easier to properly maintain as an entity than a corporation, and hence much more difficult to "pierce".

Some confusion occurs because of a misunderstanding of the plaintiffs charges. When an individual with an LLC is sued, the lawsuit against them individually is often due to actions they took individually, NOT as an officer or member of the LLC.  So, if I commit fraud through my LLC, I’m still liable personally for fraud.  If the LLC purchases a property and is sued for something related to the property, chances are I would “survive” any attempt to sue me personally (absence fraud).  
The “piercing” of the entity occurs when it can be shown that the individual and the entity are “alter egos”.  Circumstances like not holding annual meetings for corporations, not having corporate resolutions , commingling funds, taking money out of the corporation personally without that withdrawal being either a salary or dividend, etc.  Notice, many of these apply to corporations only, not LLCs.  For instance, unless specifically called for in the Articles or Organization, LLCs are not required to have Boards of Directors, Officers, annual meetings, bylaws, resolutions etc. So the absence of such in an LLC can’t be used to “pierce the veil”.  Further, a member of the LLC can take a draw from the LLC without it having to be regarded as and follow the for,Ali toes of a salary or dividend, so again can’t be used by a plaintiff’s attorney to pierce the veil. 

Best asset protection?  Invest through a remote entity owned by your self directed 401K.  No judge would allow the 401K to be liable for an action of an entity owned by it.  Further, your 401K, or any legit retirement account, is protected from YOUR personal liability.  

[Jay Hinrichs]

Quote from @Patricia Andriolo-Bull:

Quote from @Jay Hinrichs:

Quote from @Patricia Andriolo-Bull:

Quote from @Jay Hinrichs:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

100% gurantee if you get sued your llc is going to get named and you will get named personally then if you try to argue only the LLC should be sued then thats a separate motion and more money and from what I have seen rarely works.. Unless the LLC clearly has members that are separate from teh manager.  But any person or single member or family your wasting your time with that arguement that only the LLC is liable. At least from what I have seen.. LLC is a tax vehicle Not an asset protection vehicle for single members and or family type lLCs at least from what I see.

Completely agree with the original post but an LLC is NOT a tax vehicle. If done correctly, it is for liability purposes. 

it is a tax vehicle as well.. it allows uneven distributions.. You can also recapture loss's in it compared to a C or S corp. so it does have tax planning benefits.

 Only when electing to be treated as a corporation otherwise it is a pass through entity.

correct and that is how I have personally benefited..  Liability NOPE its all about FOR ME tax advantages working with investors to have uneven distributions IE more profit for the investor vs the amount of prorata cash they have in the deal.. And the GFC where I had spectacular earning years right up to 2008. And I basically got to go backwards and recapture all the tax i paid in the preceding 5 years based on how crappy the RE market was and how the loss's most of us lenders and RE folks were taking. With out those 6 figure IRS refund checks coming in from 09 to 2012 things would have looked quite different in my world. We all have short memories :)

[Steve K.]

But my YouTuber guru told me he wouldn't take me seriously and let me buy more of his courses until I set up 12 LLC's with his affiliate LLC creation company for $3k each! You're telling me I don't need all those?

Just kidding. We only started setting up LLCs when we started buying commercial properties, requirement of the lenders. And the one time we did get sued by a tenant the LLC never came into play (slip and fall on ice that the tenant won a nice settlement on from our insurance company, insurance company handled it all).

[Michael Baum]

Well posted @John Underwood, we have been chatting about how an LLC isn't necessary and insurance is your best friend.

Real world examples. Love it!

[Calvin Thomas]

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

[Steve K.]

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

[Sarah Kensinger]

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

Exactly what I point out to those asking about LLC/trusts. If you don't have a good operating agreement, understand it, and follow what it says, you just lost your asset protection. It's not that asset protection doesn't work, it's the member of the LLC that didn't follow directions and made it void. 

[Stetson Oates]

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

[Sarah Kensinger]

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

This is true! Trusts are the arm that saves a homeowner from major taxes when a property is in an LLC. 

[Danny Rodriguez]

Quote from @Mike Dymski:

I invested for over ten year before I had my first LLC.

 What made you finally get one?

[Marcus Auerbach]

Quote from @Danny Rodriguez:

Quote from @Mike Dymski:

I invested for over ten year before I had my first LLC.

 What made you finally get one?

I'll take a guess why Mike got an LLC: the lender required it for a commercial loan.

[Mike Dymski]

Quote from @Danny Rodriguez:

Quote from @Mike Dymski:

I invested for over ten year before I had my first LLC.

 What made you finally get one?

I invested in a commercial property (apartment community) with a commercial loan that required it.

[Steve K.]

Quote from @Stetson Oates:

Quote from @Steve K.:

Quote from @Calvin Thomas:

Quote from @John Underwood:

I stumbled across this lawsuit while looking for something else.

As I have mentioned before in this forum an LLC that is not 100% property ran can easily be pierced and the owner sued personally.

Here is an example of where an attorney went after someone that thought their LLC would protect them:

18. Upon information and belief, the member(s) of the Defendant have failed to observe any corporate formalities in that: a. b. c. d. e. f. g.

19. The members did not observe corporate formality; The Defendant did not pay dividends; The Defendant was insolvent at the time of its actions; The Defendant’s members siphoned funds from the Defendant for their own personal use; The Defendant’s members comingled funds; There are no corporate records; The corporation(s) were a facade and alter ego of the member(s) of the Defendant. In addition to the eight (8) factors laid out above, failing to pierce the corporate veil in this matter would create an elementary injustice and fundamental unfairness. The member(s) of the Defendant have used the corporate shell as a way to avoid any liability for the serious injuries that were caused to the Plaintiff and others by the reckless action of the Defendant’s member(s) and agents. With this in mind, Plaintiff should have compensation directly from the member(s) if the same cannot be had from the corporate Defendant. To deny this compensation would create an injustice and fundamental unfairness.

20. For the reasons and for other reasons to be proven, the Plaintiff is entitled to pierce the corporate veil and assert individual liability against the member(s) of the Defendant.

It's always best to have multi-member LLC. You have a stronger ability to not allow a court action to pierce the corporate veil. You can have a parent LLC owned by two trusts, 50/50 and you'd have double the protection. Since it's trust ownership, there are some additional benefits. As always, speak to a lawyer. This shouldn't be taken as legal advice. However, this is how I've done it. The Kushner's do it this way, as well as President Trump. So, some food for thought.

Trusts seem to be the preferred method of liability and asset protection among the wealthy. 

Trusts offer no liability protection. LLCs can protect you from outside attacks that have nothing to do with your real estate operation.  For example, a car wreck. You will be sued personally and everything in your personal name is unprotected. The rental insurance doesn’t protect you in this example, driving a car is the most risky thing we all do.

Asset Protection Trusts, Offshore Asset Protection Trusts (Cook Islands, Belize) and Irrevocable Trusts with a spendthrift clause are examples of how trusts can provide asset protection from lawsuits. Google “OJ Simpson asset protection strategy”.