All Forum Posts by: Mike S.

Do you have some good insurance brokers to recommend who cover Broward County?

So far I have been unlucky with the few prior brokers I worked with.

Either they have no clue how to deal with rentals and LLC or they never follow up on requests and I have to chase them down for weeks before getting any return call.

I am looking for a broker who could take care of all my insurance needs for my home, LLCs with rentals, condos, commercial and personal liability, etc...

If you are closing in your own name, you should pay yourself. How can you justify having a different entity paying for something that you buy for yourself? That would be commingling money and would pierce the veil of your company.

Depending on the bank a trust account will be considered a personal account or a business account. I created a living trust for my estate planning and retitled my personal accounts accordingly. Some banks kept it under the personal account agreement, some made me switch to a business account agreement.

Originally posted by @Michael S.:

What is legal to include in the articles for an LLC in Texas may be an illegal structure or arrangement in New York, for example. Be very careful doing this unless you're using articles from another LLC formed in your state.

 Excellent point I forgot to mention.

Registering a company is really easy and you can do it yourself or use any of the registered agent services that will charge you a small fee for it.

However the operating agreements, that would be signed by the members, are the most important piece of internal documents, especially for asset protection. The boiler plate ones that are provided by online services are very generic and are not optimized for the goal of your LLC. I you create an LLC for asset protection, you will need asset protection oriented operating agreement. If you want an LLC for a partnership in a real estate purchase, you will need an operating agreement optimized for that goal, etc...

That is why it is highly recommended to have a lawyer specialized in your field of operation to draft this operating agreement for you. Even if this document is not recorded nor published, that will be this document that will be your first line of defense or point of failure in court.

Now if you have multiple LLC having the same function, you can pay once for the first LLC and reuse the same operating agreement for the others.

In the same token, you can find some companies that are selling operating agreement templates that are focused on a specific goal. That may be cheaper than a full lawyer draft customized one.

You can also collect multiple sample operating agreements from other investors here at BP, and pick and choose the article that make sense to you and draft your own one. But that is risky if you don't know what you are doing as you may miss some big items. Also, you won't get any specific advice from non lawyers as it would be illegal to do so.

For me, I am more a DIY type and I have bought some specialized templates. I am also collecting operating agreements drafted by different lawyers from other members to attempt to compare them and try to understand the differences and see if I am missing something important in mine. For my core main asset protection holding LLC, I had my operating agreement reviewed by a lawyer.

When you have a tenant moving in the middle of the month are you prorating the first month and then collecting the next rents on the 1st, or are you collecting a full month and changing the lease contract to make the monthly due date on the anniversary day of the beginning of the lease?

I can see the following pro for both options:

prorate month:

- lower the total amount of money that the tenant has to give to move in, in addition to the last month and security deposit.

- make all collection date the same for all properties.

change date due:

- give a cash flow spread over the month

I have done both so far, and with only a few properties, it did not create too much havoc in my management.

However I would like to hear your advice and experience on the matter.

To limit the risk of the due on sale clause, you can create a land trust that you would be the initial beneficiary, then make an assignation to your LLC.

Do not do a quit claim deed, you may loose your title insurance. Instead use a warranty https://m.youtube.com/watch?v=srTDquLh4e8

While you are alive, there is no difference between you and your revocable living trust. Everything you own directly or that the trust owns is considered yours if your are sued. That is why a revocable trust is not providing any asset protection.

The concept of liability protection from a LLC is double:

- it protects the owner from liability arising from inside the LLC (ie if you are sued for a problem due to the property inside your LLC, they can't touch your own asset that are not in the LLC). This protection is the same in every state.

- it protects your LLC asset from a lawsuit against you personally through the charging order that only grants access to any distribution taken out of the LLC to you, but can't access what is still inside that is not distributed. This protection will differ from state to state going from very weak to very strong. There also could be differences depending if the LLC is single or multi member.

If you are in a state that does not give good outside protection, the trick is to create another LLC in a State where the protection is strong, and have this holding LLC own the other LLC in the weak state. You then still have the inside protection, but gain the outside protection from the strong state.

It does not change anything on the asset protection level if the member (ie owner) of the LLC is you personally or your living trust. For estate planning purpose however, you want to have your LLC owned by your living trust to avoid probate as you mentioned.

The interest to have two different entities for owning and managing properties is that you can have them taxed differently.

Your management entity could be a C corp or an LLC taxed as a C Corp. You can then get the fringe benefits allowed to a C corp (medical expense reimbursements, qualified retirement plans contributions, ...). Depending on your goal, you will structure your C corp duties/management fee to make as much or as low money as you want to achieve your objective. You will also use it to deduct most of the allowable expenses.

You will have to file a separate tax return, but its a small price vs benefit.

Last, on the asset protection level, some of the actions filed against you may only concern the management side of the business and won't affect the asset in your other LLC.

For just one rental, it may be too complex of a structure to create. But it will always be a question of cost vs benefit that only you can ultimately answer.

And I forgot to mention, no, an umbrella insurance is not the same thing :-)