How many llc's should I have.

Question

Scott Smith · Answer

Hey @Ron Alexander,It's a good question. This question is posed a lot on the forums, and it is important to take into account what goals you are trying to accomplish. If the discussion is about the strongest asset protection available my opinions range in toward the "ideal" asset protection structure. But when you discuss an asset protection structure that fits your investing portfolio, then the discussion changes. In the end there are lots of questions that I would pose prior to giving any advice which would include some of the following: do you own those properties under your personal name? Do you intend on growing your portfolio? What is the net worth of those properties? Do you have partners involved in your investments? And many more...Generally, here is what I would encourage people to look into if they have more than 5 properties: set up a Series LLC. The benefits are substantial, and the same traditional LLC case law will generally apply regarding liability shields and piercing the veil of a Series LLC.

The Series LLC offers several benefits to prevent lawsuits through anonymity, separating your asset's liability, cost savings (you are only forming a single entity rather than 9 + however many more you plan on getting) and streamlined administration (a single entity can be managed easier than 9 between banking and taxes.) Not to mention you can scale infinitely with a Series LLC.

You can also set up an additional traditional LLC on the side to perform your "operations" that would separate the liability for operations from your assets, or properties. Once again, this takes proper execution. It all comes down to managing your investments and their risk. But, once a lawsuit is even threatened you cannot take action on this - it is a proactive move.

Costin I. · Answer

@Ron Alexander For distribution, you can have one or more per LLC, and that depends on multiple factors:

- property class - you might not want to mix A class property with a D class property in the same LLC, due to different tenant level

- cash flow - you might want to keep your cash flow cow separate (and alone) from the ones that barely produce (and can be combined in one LLC till they start "producing")

- equity - you might want to keep the one with large equity in its own LLC while you can group the ones with little equity in another LLC (let's say you have one with 50K equity in its own LLC and 3 other each with only 10K in another LLC, till their equity grows to your risk threshold when you move them out in their own LLC).

- number of units (in the case of MF)

- location of real estate

The investor has to decide what mix is optimal for their situation.

If Series-LLC is an option for you, get one and put each property in its own child Series-LLC, problem solved.

Costin I. · Answer

Well @Ron Alexander, now you are compounding your rabbit hole. A Series-LLC doesn't require each child to have their EIN - I don't even know if you can get an EIN per each child of Series-LLC.  Nor bank account - actually banks will give you a hard time if you try to open multiple bank accounts to track each child Series-LLC when you only have EIN for the parent Series-LLC (but check with different banks, some are quite a pain, others have more flexibility). But you don't need that - you only need to have a good bookkeeping system setup such way that it will allow you clear separation of incomes and expenses for each child Series-LLC (at least that's what I was instructed by my lawyer).

Can you register or convert an LLC as a Series-LLC? I think you can convert an LLC into a Series-LLC, but it might be more cumbersome/expensive than creating a brand new Series-LLC. Plus, if you already have a regular LLC, you might want to use it as the operations/shell/property management LLC - the one interfacing with the public, dealing with tenants and contractors, leasing, repairs, marketing, etc...and that is just a shell LLC with little capital and no assets (vs. the asset holding entity one - Series-LLC - that is doing just that...holding).

Steve Vaughan · Answer

If houses with debt or that you'll want to refi EVER, I say zero LLCs.

Commercial property? Good fit.

For me it's all about property type and whether you want anything but crummy commercial loan terms.

Javi Chipi · Answer

@Ron Alexander you should review what kind of protection an LLC offers in the state where the real estate is located. Also consider how you will title the LLC interest (individually, as tenants by the entireties, JTWRS, etc). Some states have charging order protection for SMLLCs and some states don’t. MMLLCs are generally better.

Dennis M. · Answer

I’m going to do something like every batch of 5 gets its own llc . If there’s a slip and a lawsuit I’d hate to lose the entire portfolio over some fraudster  . Atleast you could bounce back if you still had half .

Don Konipol · Answer

@Ron Alexander

Ultimate asset protection, have a SERIES LLC, with each property in a separate series.  The benefit of separate LLCs for each property with the formation costs, franchise tax costs, and accounting and tax prep costs of a single LLC.

How many llc's should I have.

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