LLC with out of state investments

[Darlene Lyons]

Hi everyone, As I continue to read and try to educate myself a question has come up. I'm a resident of Connecticut, but if I want to invest in let's say Massachusetts, will my LLC protect me?

[Shaun Reilly]

I pretty much agree with everyone.

To expand on Curt's point, you should be well insured. Adequate property insurance with a high liability coverage. You can get business liability insurance for your LLC and you want to maintain good personal coverage and have an umbrella policy, though in my experience they limit the number of covered rentals and won't extend coverage to being sued personally for business activities (i.e. stuff you LLC does).

As for an LLC you should get the same protection regardless of what state you set it up in as long as you maintain it correctly. People will debate how much protection that is, but the state isn't really a factor.

You hear a lot of stuff about the advantages of having one setup in different states but that doesn't really matter in real estate since if you get sued you are getting sued where the property is and those laws will rule the day.

In general you should setup your business entities either in your home state or where the properties are.  If you do it in your home state then invest someplace else you will have to register it in the other state anyway.  If you are not 100% sure where you will invest and/or you might do it in different states but want to use the same company for all then just do it in CT to start.  

I have a local LLC that I do all my rehabs in, I also own several local rentals in my own name and have an umbrella and I have some out of state rentals with entities in that state to own them. So I see positives and negatives to all the general ideas.

BTW since you did mention MA I will tell you it is wicked expensive to have an LLC here. $500 to setup and $500-520 annually to maintain it (This is only registration fees, doesn't include any legal work to actually draft documents if you want to make sure that is done right, aka making sure you might actually get some protection). So unless you are going to be doing a lot of stuff here you can get a big assed umbrella policy to cover 1-2 rentals then expand later on you can setup an LLC if you are growing enough to justify the costs.

This is also one reason why I setup my out of state entities in those states rather than register MA ones, those places are MUCH cheaper so since that is where the properties are it makes sense.