LLC to own Short Term rental

[Michael Cummins]

I know there have been many posts about this, but wasn't able to find this specific part addressed yet... 

If I'm buying an STR, and having it professionally managed, would the benefits of an LLC over good insurance be significant? I think if I was self managing, I would default to an LLC, but for this passive/hands off setup, is the protection that much more substantial?

I use LLCs for all my LTRs, and have a separate LLC that does the management for those properties, to separate out as much as I can for asset protection. But in the case of having it fully managed by others, with a STR policy that requires $1M liability anyway, plus the management company's insurance, wouldn't most liability fall to them first as they're contracted to keep the property in suitable condition, then I'd still have pretty hefty coverage if something went beyond that?

Just trying to see if its worth the hassle and costs of a NC LLC. My PA LLCs are much cheaper and easier to maintain, plus not needing an out of state registered agent, etc.

Thanks all!

[Michael Cummins]

Lots of people use LLC for STR. I have my other one in an LLC, as in PA it's pretty easy and cheap to maintain, plus I don't need to pay for an on state registered agent since I live here. It's also the one property I have co-owners with, so the LLC makes that cleaner.

LLCs definitely do add significant additional personal asset protection over just insurance, but they're not bulletproof. It's not terribly difficult to pierce the corporate veil, if you don't operate in a very consistent professional and totally separated from your personal finances manner. If you do all that, it's a big stretch to say it's easy to pierce the veil and that it doesn't offer any real protections, but it's also a big stretch to believe the LLC will definitely protect you.

For property management, I personally would never do that outside of the protection of an LLC. Most liability will fall there first. That's why I have a separate LLC just to manage the properties I own in different LLCs, one more layer of liability and asset separation.

But this kind of gets at my main distinction in the question compared to other posts I've read here about the topic... If you're hiring out the management to a large professional hosting company, who are responsible for the maintenance on the property, wouldn't that place the majority of liability claims against them rather than the property owner? Then you have your own good insurance on top of that. Certainly not bulletproof, but seems like this would cover the vast majority of potential liability issues. 

Or am I missing something?