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All Forum Posts by: Mike S.

Mike S. has started 18 posts and replied 1203 times.

Post: LLC in GA but Looking to Buy Property Out of State

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933

You can legally put the property into your LLC, however if your property is not registered in the same state, you will not be able to do any legal action on its behalf in that state (file for an eviction, contest a code enforcement action, etc...).

You can either register your foreign company in that state or you can open a new LLC in that state. If the cost of foreign filing versus opening a new LLC is almost the same, it may be better to open a new single member LLC, that could be owned by your original LLC or another holding LLC. You will split your asset in different LLC, limiting the amount at risk in each entitity, creating a better asset protection structure. As a single member LLC, it would be a tax disregarded entity, creating no more tax burden that you already have.

Regarding umbrella policy, I hope that you already have one in place as it is a must, LLC or not. Don't forget to update it with your new property.

Post: Asset Protection for Real Estate Investors

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933

By the way, I'm all for a dedicated sub forum on asset protection issues.

Post: Let's talk about Partnerships!

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @George W.:

So if i decided to go a joint venture, basically I'd still have to do an LLC? but if the investment is out of state would i have to set up the LLC in the other state or would it be enough to have one in just my state?

As a general rule, you want to have your LLC registered in the state the property is. Now if you already have an out of state LLC that you absolutely want to use for this new property, you can also foreign registered it in the new state, but you would be paying two state fee instead of one. Also if you enter into a new partnership, it is probably better to create a new entity dedicated for the arrangement that you have with your partner.

Post: Asset Protection for Real Estate Investors

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Brian Bradley:

@Jade S.

What you really want is an Asset Management Limited Partnership acting as a (COP) which owns the LLC in any State, which in turn owns a piece of property.

While the LP has the most case law and track record compared to the more recent LLC. Is the LLC a viable replacement for an LP as an asset protection holding structure?

In the same token, the usual holding LP structure will be a corporation as General partner and your living trust (or DAPT or foreign AP trust structure) as a limited partner. If you use an LLC instead as holding entity, would you still need to use the multi member structure to perfect the protection, or a single member LLC would be enough in states that have built in single member charging order protection as sole remedy (not following Olmstead vs FTC)?

Post: LLCs vs. Umbrella Insurance for first rental

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Marc Winter:

@Mike S., you are assuming a very critical point:  who said I own any beneficial interest?  And the beneficiaries cannot be sued; they do not own the trust.

In any event, you go with LLC's. Have a nice day.

If your trust is revocable, you have the right to revoke it, and you will be compelled to do so if you lose your law suit.

Again, you are the only person that I have heard so far stating that a revocable trust provides asset protection. If your structure is providing you what you want for it to do, then everything is fine. However, unless I misunderstood what you described, I would strongly suggest that you get a second opinion from your lawyer, as I do maintain that a revocable trust does not provide asset protection.

Respectfully

Post: LLCs vs. Umbrella Insurance for first rental

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Marc Winter:

@Mike S., sorry, but I still have to disagree with your interpretation of what is protected and what is not protected in the trust I described.  Please do your own research, and the facts will speak for themselves.  

I'll be interested if you have any case law on that as all my research and cases that I have found showed that a revocable trust does not provide any legal asset protection.

It does however creates anonymity. In that way, it would avoid any lis pendis or other generic liens as your creditor is not aware of your ownership of that property. However, if you are sued and lose the case, you will have to disclose all your asset, including the trusts that you have beneficial interest in. When disclosed, the creditor will easily obtain full access to them, including the right to foreclose.

In an LLC or an LP structure, even when disclosed, the only judgment that could be obtain in some state is a charging order that give the creditor the right to receive any distribution from the LLC or LP if any. But if your operating agreement is properly set up, you won't have to make any distribution and your creditor will still have to pay tax on them. Its a poison pill that will deter any creditor to go against your LLC or LP.

Post: LLCs vs. Umbrella Insurance for first rental

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Ned J.:

The liability protection of an LLC can be easily pierced by a decent lawyer if you don't really run it like a true LLC.....

 I agree that if you spend time and money to create the structure, you need to use them properly. If you can't do a minimum of paperwork and keep the money flowing through the proper entity, you will weaken your structure. It would be like installing a high security lock on your door, but never locking it... It may be impressive and looking nice, but that wont stop anyone to open it...

Post: LLCs vs. Umbrella Insurance for first rental

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Marc Winter:

Umm, an LLC will limit liability, but I am not aware of how that is asset protection any more than a trust.

As I explained before, if you are sued personally, for anything unrelated to your property (car accident, your kid do something stupid, ...), you can loose all the asset that you own in your name. The assets owned by the LLC won't be reachable by your creditor (in States where the charging order is the only remedy).

Same if you have multiple LLC, if you are sued for something related to one of the property (slip and fall, ...), you can loose all the asset owned in the same LLC, but your own asset and the other LLCs asset will be out of reach.

A revocable grantor trust (living trust, personal property trust, land trust...) does not provide any asset protection at all. An irrevocable trust will, but then you loose control and benefit of the asset, because technically, it's not your asset anymore.

Post: LLCs vs. Umbrella Insurance for first rental

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Sam Jiang:

I have same question about newB setting up insurance or LLC. Can someone give some details to tax paperwork as when buying one rental worth $50k, and I have to file taxes for each LLC which will be a nightmare when you have 10+?

An LLC can be taxed as a partnership, C Corp, S Corp or as a disregarded entity (only for single member LLC). You make the choice when you create the structure.


The usual structure when you have multiple entities would be to have all your properties held in individual single member LLC. These LLCs will be disregarded entities and there will be no tax return. All the tax reporting will be on the single member tax return. If you are the member, then all of them will be on your tax return. If your individual LLCs are owned by a holding LLC, this holding LLC will do the tax return (unless it is also disregarded).

If your LLC is multi member, the default taxation is as a partnership and you will have to file a 1065 return and issue a K1 to each member. No tax will be paid by the LLC, but each member will include the K1 in their own tax return.

Post: LLCs vs. Umbrella Insurance for first rental

Mike S.Posted
  • Investor
  • Broward County, FL
  • Posts 1,220
  • Votes 933
Originally posted by @Marc Winter:

@Joseph Gambino, you've received lots of good advise from some very smart folks.  I'm not that smart, but I know what works for me: TRUSTS.

Land trust are great for anonymity and to avoid the due on sale clause, but they are not providing any asset protection (except in Florida).

I am using Land Trust and assigning the beneficial interest to an LLC for the asset protection part.