All Forum Posts by: Jason Marino

Hi Christopher,

If you are risk averse, a combination of insurance and an LLC is a good way to protect your assets. Insurance coverage can be and is denied for various reasons. At that point, it is useful to have the property owned in a limited liability vehicle. I think that veil piercing should be a consideration in the decision to get an LLC or not, but it should not be the sole consideration. LLCs exist for a reason, and, when created and operated in the right way, they will generally withstand a challenge. Veil piercing not a default process for LLCs. You can research the standard in the State where your LLC is located. There is a test generally that must be passed in order to pierce the corporate veil that usually includes several factors.

Hi Gabriel,

You have more than a single option to create a structure. If you are interested in an LLC, you could form a Utah LLC and then register it as a foreign entity in New Jersey in order to own the rental property. In this situation, there would be 2 States that you have to maintain the LLCs in, Utah and New Jersey. This means 2 registered agents to receive any notices, 2 compliance schedules that you have to maintain (if applicable). Another option would be to create a New Jersey LLC to own the property. This would require you to maintain the LLC in New Jersey and not in Utah.

Hi Jake,

An LLC that owns property is normally considered doing business in the State that it owns the property in. As a result, the LLC will need to be formed in that State or registered as a foreign LLC to do business in that State if it was formed in another State. If you do not do this, there is a risk of fines, and, worse than that, if the LLC is involved in a law suit, it can be invalidated for not being registered to do business in the State. This would remove a large benefit that an LLC can provide with its limited liability protection.

Hi Michael,

You can use a template for an Operating Agreement, but you should try to review the template carefully to make sure that it makes sense for your situation and your goals. You and your LLC are unique, so normally Operating Agreements will require some customization to work for a particular context. Additionally, you need to conform to the actions that the Operating Agreement requires as much as possible as well. For example, if the Operating Agreement mentions that you need to have annual meetings, you should hold annual meetings. Having an Operating Agreement and following it as a guide will increase the chances of your LLC withstanding a challenge.

Hi Robert,

To make a transfer from yourself to an LLC, you can use a real estate attorney or a title company. You could try to create and record a Deed yourself, but you would need to research the State and County requirements for a Deed. The rules vary, so it is important that you get the right template.

Hi Amie,

What would your Holding Company own? If you are a California resident, there is a more cost effective way to create a Holding Company than an LLC. As mentioned in the comment above, an LLC will require fees in both Wyoming and in California. If you use a Delaware Statutory Trust, you can avoid these maintenance costs. This entity has similar limited liability protections to Corporations, but, as a Trust, it can avoid some of the maintenance costs.

Hi Jason,

I agree with the post above. With a single investment property, an LLC may not be worth the cost of its creation and maintenance. However, if you have plans to buy additional properties sometime in the future, it would make sense to create a structure that can grow as you increase your assets. A good plan would be to speak with an attorney and an insurance professional to see how both options work and what their limitations are.

Hi Jeff,

Your situation and your goals are unique. Based on that, a custom Operating Agreement is the best option. However, if you can find a solid general template and alter it with language that will apply to your context, that should work. You will need to be able to cover many different issues and think ahead in relation to potential issues that may some up. You can additionally make alterations over time as well as new scenarios arise. With both options, a fair amount of thought and discussion should be a part of the process.

Hi Jeff,

It is not commonly recommended to use a foreign LLC to own property in another State without registering the entity to do business in that State. Not registering the foreign LLC to do business in the State that it owns property can result in fines, and, if the LLC is sued, the LLC being invalidated. Based on that, you could have a single LLC that owns properties in different States, but you would have to register that LLC in each State. This means that you will have to comply with the regulations of each State that the LLC is registered in. Alternatively, you could create separate LLCs in each of the States that you own property in. If you wanted to avoid this issue, you could have a single LLC that owns the properties in a less direct way. If the LLC owns Land Trusts and the Land Trusts own the properties, this can usually avoid the foreign LLC registeration issues described above.

Hi Johnnie,

I agree with the post above. Among the best ways to control this situation is to create an LLC with multiple Members. This LLC should have an Operating Agreement that explains in detail the control and ownership of the entity. It should additionally include language that covers payments, resignations or removals, and dispute resolution. This document will avoid confusion and help control different situations that you and your partner experience.