Texas Series LLC Vs General Libility Insurance for LLC

[Gary Mandala]

Hi-

I have an existing traditional LLC (me & wife members) with couple of Farm land properties that are leased out. I am planning to buy and hold cash flow rental properties now. I am trying to figure what's the best approach for deeding rental properties from Asset protection stand point. I read series LLC gives good insulation for individual rental prop but involves lot of book keeping,paperwork, etc. Can you all please share your thoughts in general on series LLC and also answer the below.

1. Can I just deed rental properties under existing LLC and buy General Liability insurance for the LLC to cover any lawsuit from rental props?

2. Should I convert my existing LLC into a series LLC and redeed all existing props to sub series and create new subs for rentals? Is it worth the change?

3. Should I create a new series LLC and create subs for the rentals.

I just want to keep things simple from management standpoint and solid from Asset protection standpoint. Option 1 sounds good for me but I want hear from the Pros.

Thank you! for your time.

Gary

[Robert Steele]

It depends on who you ask. If you ask a lawyer they will tell you to create an LLC for every property you own. If you ask an insurance agent they will tell you to buy insurance out the wazoo.

I think the asset protection mantra pushed on landlords is solely designed to make money for lawyers, insurance agents and asset protection gurus. In 20 years as a landlord I have yet to need asset protection. It doesn't mean I don't have it. Just saying I haven't needed it.

Here's the problems I have with LLC madness and why I prefer liability insurance.

1. I've heard from several lawyers that they haven't met an LLC that they couldn't pierce.

2. LLCs only offer upstream protection. Meaning protection from tenants. If you personally get sued for something outside your businesses they can still come after your LLC ownership interests and your assets.

3. When your LLC does get sued who is going to represent you? You will have to pay for a lawyer. As opposed to insurance in which it is the insurance company that pays its lawyers to settle or defend you. If you have ever gotten involved in a lawsuit before you will realize that the costs can mount quickly. Then when you lose, you are not only out the single property in that LLC but tens of thousands in legal fees.

4. Bookkeeping and incorporation costs are a pain.