Holdings LLC and Properties LLC - Philly Rental License

[Tabitha Alvarado]

Per my accountant's guidance, he suggested I set up two LLCs for liability reasons. A holding company that owns the assets and another that deals with PM/tenant activity. On the deed, TABS Holdings LLC owns the property. I applied for a rental license in Philly with TABS Properties which is the entity that deals with the PM/tenant, rehab, and rental collection. The city came back and said the rental license needs to match the entity on the deed. Is there any way around this? Will this open us up to litigation if a tenant wants to sue in the future?

[Stuart Udis]

This seems to be overkill. Ultimately, if there is a legal dispute whether or not there is merit to the claim, the plaintiff's counsel will bring in whomever they feel warrants being named a defendant. The deed holder will be on the top of the list. Having an LLC that owns one property and a separate LLC that handles the PM and Tenant activities is the clearest case of an alter ego and will be quite easy for a plaintiffs attorney to break through to the deed holder entity which seems to be your objective. The best advice I can offer is to keep your rental license active, sign contracts each and every time you engage a vendor/independent contractor, make sure you have appropriate levels of insurance, and make sure any vendors/independent contractors you engage is properly insured and list you as additional insured. Perform these steps consistently and you will avoid far more liability than creating shell LLC's (and save money on unnecessary tax preparation services).