All Forum Posts by: Mike S.

I have a single member LLC in the same state as each property (to be able to respond/initiate any legal action in that State like an eviction). All these single member LLCs are owned by a WY multi-member LLC. The WY LLC is giving me the charging order protection.

You will buy the property under your own name. After closing you will deed the property to a land trust where you are still the beneficiary. The due on sale clause won't be triggered thanks to the Garn St Germain act. You will then assign the beneficial interest to your LLC.

I have done it before without any issue.

You have two kinds of protection by using entities like LLC.

The inside protection: any liability coming from inside the LLC, will not extend outside of it and you personal property won't be at risk.

The outside protection: any liability arising from you personnaly should not extend to the asset inside the LLC.

The inside protection is generaly the same in every state. However, if you do something stupid or illegal as a member or employee of the LLC, you may also be personnaly liable. Also if you did not treat your LLC as a separate entity (mixing of personal account, lack of proper documentation or filing, etc...) you may pierce the veil of the entity and it would be disregarded by the court.

The outside protection varies between states. The best protection available is when the charging order is the only remedy (ie, any creditor can only get distribution made out of the LLC if any, but can't force the LLC to foreclose or have an active participation in its operation, but still has to pay all taxes due even if no distribution has been made).

A lot of states don't have the charging order as sole remedy and a judge may order the LLC to foreclose. In case of a multi-member LLC, showing that another member would be harmed by the forclosure may help to avoid this judgment. But the other member should be completely unrelated from you. Some state like Florida have the charging order as sole remedy for multi-member LLC, but not for single member (since FTC vs Olmstead). Other states like WY have charging order for both.

So as a general rule, multi-member LLC have better liability protection than single-member, but you may be ok in some state.

Different ways to get the added multi-member protection is either to have single member LLC owned by another single or multi-member LLC in another state where the charging order is the sole remedy, or to add a minority second member like a corporation, an irrevocable trust, another LLC, a child, a spouse or another family member.

I agree that multiple LLCs are more expensive than a series LLC. However, as I stated, I preferred to have the LLC in the state of the property. Series LLC is not available in the states where I have properties and foreign filing would negate the cost benefit.

I could have used an LLC taxed as a C-corp instead of a full C-corp. The cost difference between both is minimal. I also need to be more careful with the paperwork (shareholder meeting, minutes, etc...). But these are easy to do, you just need to be organized. However I had much less trouble dealing with banks for my C-Corp than for my LLCs.

You will find different opinions but after all my research I decided the following setting for my own structure. Again it is a matter of choice and what will make you sleep better at night.

I used the following rationales:

I am using a land trust for each property for anonymity (and also for some additional liability protection available in Florida with Florida Land Trusts) and due on sale clause shielding.

Each land trust has, as beneficial owner, an LLC that is in the same state than the property. It allows for the LLC to legally act in that state for any legal action like an eviction. These LLCs are single member. They don't file any taxes are they are pass-through disregarded entities.

All these LLCs are owned by a WY holding LLC.

The reasons for the WY holding LLC are multiple:

- It gives the WY charging order protection to all my sub LLC that may be in states where the protection may not be that great.

- It gives anonymity to the whole structure

- It merge all the tax reporting from the sub LLC to that single structure.

I decided to have this WY LLC as a multi-member for different estate planning reasons and also for additional asset protection. So this LLC is filing an informational tax report 1065 and issues K1 to its members.

If I had multiple properties in the same state, I may have used a series LLC instead if it was available. However, in FL the series LLC does not exist. Some will argue that you may use an out of state series LLC instead and rely on the land trust as the in-state entity. However, I preferred to have the LLC in the same state.

In addition, I created a C-corp to act as property manager and collect rent, pay for repairs, etc... My LLCs are paying that C-corp for its service and I use it to deduct all my expenses and also to get fringe benefits. I may also decide in the future to collect a salary out of it to invest in a retirement plan or to better my W2 for future loan need.

At the end of the day I have two additional tax returns to prepare: one for the C corp and an informational 1065 for the holding LLC.

Each entity has a cost to create and to maintain. Only you can assess if the cost is worth the benefits that you are getting out of it. In my case I believe it was.

I don't have a flipping activity, but for that I would probably have a dedicated S-Corp.

But we are on a thread, and sewing it will maybe stop unrolling it. And doll rhyme with troll.

The amount of damage that you claim suffering will decide in which court you will have to start your action. As others have suggested before, I would highly recommend that you consult with a lawyer or a legal aid assistance to:

- have a second opinion if your action has any merit,

- receive a full disclosure on all the costs and time involved,

- understand all the steps involved.

You can get a virtual office. Look on craigslist for local provider. The cost could be around $300 to $800 per year.

Without knowing the specifics, I would create 2 LLC for the properties and a C corp as property management. I would however keep your mother as the owner of the LLC so you can get the step up basis upon her death.

From the C corp you take management fee and you can also "hire" your mother to do some administrative task for the corp and give her salary and fringe benefit.

On the book part, I read many many of them. The one that was the most comprehensive for an introduction was

Asset Protection For Physicians And High-Risk Business Owners (ISBN 9780963997128).

However the best general training that I saw was the little bit outdated "1 Day Total Asset Protection Training" by Mangelson with a comprehensive overview of estate planning, asset protection and tax optimization.

And of course last but not least, the youtube page of Clint Coons where you can find hours of training on LLCs for real estate protection, land trust, etc...

After watching all of those, you will have a better understanding of all the concepts and tools involved.

For liability purpose it is better to separate ownership from management entity.