Creating LLCs to Invest in Paper

[David Piqueira]

I understand that a lot of people prefer to structure their rental entities as LLCs to provide added liability protection. This can be mostly useful in the event of a tenant injuring themselves and trying to sue, as lawsuits related to healthcare can be very expensive.

It also looks like most people investing in paper structure their entities as LLCs. From what I have read, it looks like lawsuits are a part of this business as well, but they are generally comparatively small. It's not like people are going to try to sue you for your entire net worth because you didn't follow the proper foreclosure proceedings (or whatever the lawsuit might be). I am having a tough time thinking about when the liability protection would really come into play in the world of paper investing, so why does everybody form LLCs? 

[Adam Adams]

Lawsuits can cost a lot. You've got all kinds of regs out there that have to be followed. Each state is different. And to be honest, I don't know many, if any, teachers or coaches that teach the rules of lending and debt collection. And even if the law is on your side, the judges might not be. And the numbers can be scary. I'm actually being sued in Ohio for the loan amount and punitive damages for something the original bank did. Even the original bank didn't do anything wrong, but that doesn't matter. People can sue for anything. I doubt they will win this case, but I'm looking at over a 150k threat. And like I said, it's the judges, not the law, that decides your outcome. And what sucks is that my adversary has a free attorney called Legal Aid.