All Forum Posts by: Jason Marino

Hi Corey,

The negative to having the Hub and spoke structure that you noted is the maintenance. You need registered agents for all of the LLCs, and there are compliance costs as well. A Series LLC can offer a similar structure with a lower maintenance cost, but the cost to create the Series LLC can be more than a traditional LLC. You could create the LLCs yourself, but you need to verify that you are getting a complete LLC. The LLC should include the formation documents, an EIN, and an Operating Agreement that is suited to the entity.

Hi Rachael,

The information in the post above is accurate. You usually only need to make an amendment to the Operating Agreement to link a Hub LLC to the spoke LLCs. In some States, you may need to update the information with the Secretary of State as well if the Member of the LLC is altered.

Hi T. Philip,

There is a lot of information out there on LLC creation and the positives and negatives of having an LLC. For multi-family properties, LLCs are a common method of ownership. I can speak about the legal benefits to having an LLC, but the tax benefits are something that I have less experience with. The legal benefit of the LLC is the ability to isolate this asset from other assets that you own in other entities or personally. When an LLC is created and maintained in the right way, it can compartmentalize your assets and will provide a barrier to a lawsuit covering the assets outside of the LLC that is involved in the lawsuit. Additionally, an LLC, if structured in a certain way, can provide you with anonymity that you would not have if you were to own the property in your own name. Generally, there are few tax advantages to having an LLC as a Holding Company. As for the negatives, there is a cost in both time and money to creating and maintaining an LLC. The cost to create an LLC can vary, but I would recommend that, regardless of service you use, you verify that you are getting a complete LLC. This would include the formation documents, an EIN for the LLC, and an Operating Agreement that is created to suit the needs of your entity. Maintenance will commonly involve hiring a registered agent and any compliance that is required by the State.

Hi Corey,

I cannot speak in detail as to how a Series LLC works in Ohio. The list of States that are allowing the creation of Series LLCs has grown since the entity was first established in Delaware. I am familiar with the Series LLC in some other States, and my guess would be that Ohio has probably followed a similar structure. That said, a common advantage of a Series LLC is that it will have less maintenance than a Hub and spoke structure. The maintenance can be limited to just the Parent Series LLC in some circumstances, meaning that you have multiple Child Series LLCs with only a single registered agent and maintenance that belongs to the Parent Series LLC. I have seen investors successfully use a single bank account under the Parent Series LLC for multiple Child Series LLCs. The separation of the Child Series LLCs occurs in this situation by careful book keeping for each entity.

Hi Lisa,

The process of moving the property from your name to the name of an LLC is fairly simple. You would generally just need to create a Deed from yourself to the LLC and have that Deed recorded in the record for the property. You can contact a title company or an attorney to assist you with this, because there are generally State and local requirements that the Deed must include. Additionally, a title company or an attorney would be able to let you know if a transfer tax will be applicable when you move the property from your name to the LLC.

Hi Matthew,

There is some overlap between the different practice areas. Based on what you mentioned in your post, you should probably speak with an asset protection attorney, a corporate attorney, or a real estate attorney. If you are able to contact a few attorneys, you will have a fair possibility of finding somebody that has the experience that you need.

Hi Michael,

An LLC can provide you with limited liability protection if it is created and maintained in the right way. It would protect your personal assets from liabilities that occurred at the property in a way that is not possible if the property is in your name. As you said in your post, this protection would not cover you in situation with a lender that wants to foreclose on the property. I cannot speak as to how the insurance and the mortgage would be affected, but you should confirm with the mortgage company that the transfer to the LLC will not create a due on sale clause violation. In relation to the State that the LLC is from, you are going to usually need an LLC from a State where the property is located, or an LLC registered to do business where the property is located. The reason for this is that an LLC owning property is generally considered to be doing business in the State where it owns property. In relation to California being too expensive, my understanding is that you, as a California resident, will be required by the State to pay the minimum annual franchise tax of $800.00 on any LLC that you own regardless of the LLC being from another State outside of California.

Hi Christopher,

I agree with some the information included in the other posts. From a liability perspective, there is a limited advantage to using the LLC as a rental manager. It can help remove some of the contractual liabilities that come with interacting with parties from the property owner, and it is not uncommon to see investors using an Operating Company in this way. Based on that, you can use the LLC as a rental manager. The official way to do this is to create a Property Management Agreement between the owner of the property and the rental manager. This document would give the rental manager the ability to enter into Leases, hire contractors, and do other services on behalf of the owner.

Hi Daniel,

I agree with the post directly above. You should confirm that you can transfer the ownership of the property to an LLC without creating a due on sale clause violation. If you are able to transfer the property from your name to an LLC, it should be a Florida LLC or a Minnesota LLC that is registered to do business in Florida. An LLC owning property is generally considered doing business in the State that it owns the property, and it makes sense for the LLC to be from the State or registered to do business in the State based on this. If you do not use a Florida LLC or register your Minnesota LLC to do business in Florida, there is a risk of fines, and, worse than that, if the LLC is involved in a lawsuit, it can be disregarded as a result of not following the requirements to do business in the State.

Hi Mike,

You can actually get anonymity in other States as well. It is just a more involved process than in Wyoming. To ensure that your name does not appear as a Manager or a Member on the Secretary of State webpage, you can use a revocable common law Trust in this capacity. Additionally, you would hire a professional service provider as a registered agent. This would avoid your name showing up publicly at the Secretary of State. Additionally, to ensure anonymity in other situations, most people would not use their Holding Company when interacting with tenants, contractors, or in networking. A common option to avoid this is to use an Operating Company as your public facing entity. This company would usually have a private contract with the Holding Company to act on its behalf. This provides better anonymity for the Holding Company, and can isolate some of the liability of interacting in the Operating Company as well.