All Forum Posts by: Mike S.

Series LLC is a great concept that will probably get extended nationwide in the near future. However, as it is a relatively recent newcomer, there is not a lot of case law on it yet and your guess is as good as mine if it will provide the same asset protection than multiple regular LLC. Theory would say yes, but in practice I would prefer not to be that test case...

If you create a single member LLC, you won't need a CPA as it is a disregarded tax entity and you will report it on your regular 1040.

However, since Olmstead vs FTC, single member LLC are not very good for asset protection anymore in Florida (charging order is not the sole remedy). Also in Florida, LLC are not providing anonymity.

You could improve the anonymity and charging order protection of your single member Florida LLC, by having it owned by a Wyoming LLC. This one getting all the charging order protection and anonymity.

Do not use a quit claim did, instead use a warranty deed to keep your title insurance.

As said before, if the beneficial owners of the LLC are the same, it is considered a contribution to the capital of your LLC and it is not taxable. Some state will have you pay some stamp tax on the change of title, and some will even ask you to pay like it was a sale. Sometimes you can avoid the second one by putting your property in a land trust first where you are the initial beneficiary; then assign the beneficial interest to your LLC in a second time. The change of title to the trust may not be taxed in some state.

I don't believe that a grantor trust will provide any asset protection. To my knowledge only an irrevocable trust would do so.

I'm not a lawyer nor a CPA and this comment is not a legal nor tax advice... You've been warned.

Now, after reading multiple books on the subject, consulting with multiple attorneys, I would look into the following setup that would give you the most flexibility:

Create a living trust for yourself. That will avoid probate in case of your death.

Create a single member, manager managed, LLC for each property in the state where the property is located. A registered agent will cost you around $50 per year with cheap online registered agent service (you don't need anything fancy for that as the service of registered agent is pretty basic). These LLCs will need a pretty standard asset protection/real estate oriented operating agreement. As these entities will be disregarded for tax purposes, there will be no tax filing on them.

If you want to refinance one of the property, I would suggest to do it before transferring into the LLC as you will get better offer with a personal mortgage than with a commercial one. Then after you refinanced it, transfer it to your LLC. If you are worried about the due on sale clause, create a Land Trust for the property where you are the initial beneficiary, then make a quiet assignment of beneficial interest to the LLC later on.

Create a multi-member, manager managed, holding LLC in a state like WY (great charging order protection) that will be the single member of your two LLCs.

The majority member of your holding LLC will be your living trust (ie you). Your son would be the initial minority holder.

Have your lawyer set up a strong operating agreement that will not only provide asset protection but also keep your son as a non decision maker even if his shares interest increase in the holding LLC, making you the one in control.

Every year, gift tax free to your son more interest in the holding LLC (up to the gift tax exemption fair market value).

This holding LLC will file a 1065 and issue a K1 to all members. No tax will be due by the holding LLC, but by each member individually.

Last, create a property management C corp that you will hold all shares in your living trust. This C corp will be the manager of all your LLCs. Through this corp you would be able to get fringe benefits like medical reimbursement plan, you could deduct your business related expense, you can take a salary and contribute to a pension plan, you could hire your son or other family member with lower tax bracket to offer them also other benefits.

Originally posted by @Giovanni Luna:

but he would still have to pay for the ones he has property the the state he has property in.

In Florida I don't...

You still need to have a local tie with the jurisdiction where the property is to be able to act legally in that state (think eviction or defending a code enforcement violation for instance). You can get that tie with a land trust, a foreign LLC registration or directly by creating your LLC in that state. Whatever entity you chose, if the state requires you to file taxes for real estate income in that state, you will have to do it anyway.

As my sub LLC and holding LLC are in states where no state filing are required, the only filing is the 1065 for the holding LLC and k1 issued to each member of the holding llc.

@James Miller You could, but a multi member LLC has other inconvenient, especially tax-wise as it is not a disregarded entity anymore. In my case, I have one WY holding multi-member LLC that owns many single member LLC in each state where the properties are. The use of the WY LLC also give me anonymity in the other sub LLC as only the anonymous holding LLC is shown on the sub LLC records. I get the inside protection from each sub LLC that is good in every state, and I got the outside protection from the excellent WY charging order on my holding LLC.

It is difficult to change job and employer at the same time. It is much easier to keep the same job but looking for another employer who could offer you later another job from within the same organization.

Florida also has good charging order protection for multi-member LLC. However, it is not the case for single-member LLC (since Olmstead vs FTC). If you need a FL single member LLC, it is probably smart to have it owned by another out of state LLC that will have good charging order protection (like WY for instance).

Both are two different tools of asset protection that are not exclusive.

Liability insurance covers you financially up to the policy limit (if the insurance does not deny you coverage based on their many exclusion clauses).

LLC are used to insulate your assets in different boxes to avoid propagation of liability from one box to the other. It protects your private assets from the LLC liabilities (if you are not directly involved in the faulty/criminal behavior that created the liability to start with), and protects the LLC assets from your own personal liability (if your LLC is from a good charging order protection state).

In the case of investment with a partner however, the LLC seems a must to me as you don't want to be liable for something that could happen in your partner's life. Its operating aggreement also, will stipulate how your partnership is setup, how it will function and how you will get money out.