All Forum Posts by: Jason Marino

Hi Mary,

What you are speaking about is called a Hub and spoke model. It is a commonly used structure used for asset protection. The master LLC is the Hub, and it usually controls and owns the spoke LLCs. The spoke LLCs each own a property or an asset. Many investors will have their Hub LLC connected to a Living Trust. Whenever another spoke LLC is added, it will be connected to the Hub LLC and through the Hub LLC to the Living Trust. This makes the Living Trust the top of the structure. A revocable Trust can usually be a Manager and a Member of an LLC. Through this, it can have control of an LLC as its Manager and own the LLC as its Member. I think that the confusion comes up from different words that have similar or the same meaning.

Hi Mary,

As stated in several of the posts above, a good way of avoiding the confusion that can happen at death with assets is to create a Living Trust. This is a revocable Trust that can own the assets directly or can have a membership interest in an LLC that owns the property. The first option will not offer asset protection, but would be useful in creating an organized Estate Plan. The second option would offer both asset protection and Estate Planning. Another advantage to a Living Trust is that it can help to avoid probate. Probate is a public process that can be time consuming and costly.

Hi Caleb,

I am not familiar with Legal Zoom and what they include as part of creating an LLC. I can tell you generally what you need to have a complete LLC. The LLC needs to be filed in the State that it will be doing business. You should receive a Certificate of Formation or a similar document from the Secretary of State after filing the LLC. Additionally, many LLCs will have bank accounts. To open a bank account for the LLC, you will need an EIN. Many States will require that the LLC complete compliance on an annual basis to keep the LLC in good standing. This varies based on the State. You will need an Operating Agreement as well. This document includes detailed information on the management and the ownership of the LLC and how it will function. If you have all of this documentation and are managing the LLC carefully, it will likely create a solid entity that is difficult to invalidate.

Hi Cole,

There are varying thoughts on this, as you can see in the posts above. I think that the decision comes down to risk aversion. I always suggest that real estate investors have insurance policies. However, insurance claims can be and are denied. Insurance is a line of defense, but it does not have to be your only line of defense. When an insurance claim is denied, it is useful to have a limited liability vehicle that owns the property to separate the property from your other assets. These entities, when created and managed correctly, can and do compartmentalize the damage from a law suit. Based on this, I am not sure that there is any specific number of properties that you need to have in order for an LLC to make sense.

Hi Janelle,

For the type of investing that you mentioned in your post, it is a good idea to have an LLC if you are risk averse. As stated in the post above, the strength of your LLC depends on how well it was created and how it is run. In addition to filing the LLC with the Secretary of State, you will need to create an Operating Agreement to control how the entity functions. Additionally, you should have an EIN, and the LLC should have its own bank account. In relation to running the LLC, keeping a book of business, maintaining the LLC in accord with the compliance that the Secretary of State requires (if applicable), and having an annual meeting are things that you should consider doing.

Hi Guka,

There are a few ways to organize asset protection structures. You could have a single LLC for multiple properties, you could have multiple LLCs with a few properties in each entity, or you can have an LLC for each property. The last option is the most risk averse, as you are separating each property into its own entity, and, when done in the right way, this will separate the assets into different compartments for limited liability purposes. There is additionally something called a Series LLC, which has the effect of multiple LLCs. It is really a single LLC that has the ability to create individual LLCs under it. As far as insurance is concerned, there are a variety of options as well. Many investors have insurance policies that are related to each property, and they extend this coverage with an umbrella insurance policy.

Hi Jin,

You can make a transfer of a property yourself if you do the research. You will need to create a Deed and any ancillary documents that conform to the State and local rules where the properties are located. If you are not interested in doing this research and creating or finding the Deed, you should hire a title company or an attorney to create the document.

Hi Sam,

This is not a question that is easy to respond to definitively, as billing prices for attorneys vary from State to State. For instance, the rates are normally higher for an attorney in a larger City than in a rural area. The rates can vary regionally as well. Additionally, the price will depend on the amount of time spent on the Lease Agreement. The attorney might only reviewing and altering a template, or they could be creating the Lease Agreement from the start.

Hi Pepper,

I agree generally with the posts above. I do not think that any of the comments were suggesting that entity formation for property ownership is without any value. They appear to be directed more at your situation as an investor who is starting out and whether a limited liability entity is suitable for your situation. What you said in your post directly above is accurate. If you are risk averse and have multiple properties, the most conservative way to try to contain the liabilities generated by these assets is to try to compartmentalize them using separate limited liability vehicles. If you are just beginning with real estate investing, the formation cost and the maintenance cost of the entity or the entities may outweigh the benefits that you are receiving from the protection that the entity or entities provides.

Hi Tom,

What you are speaking about is a fairly common technique. The primary issue that I see is that you will need an anonymous Trustee for the Land Trust. There are a couple of options for this. First, you can use an attorney in this capacity. Secondly, you can use an LLC, but you need to ensure that the LLC is anonymous. If the LLC can be searched and you are the Manager and the Member on the Secretary of State webpage, you have not really reached the level of anonymity that you want. Based on that, you could use a Wyoming LLC, as this State does not normally share the Manager or Member of the LLC, or you can create an LLC in another State, but it will require a more complicated strategy to make it anonymous.