All Forum Posts by: Mike S.

I have opened multiple llc accounts with centennial bank. They are llc friendly and much more easy to work with than other banks like Chase that will take a month to decide to do anything when they see the word trust in one of the member...

If the cost of creating a new LLC is not to expensive, I would dissolve the LLC and create a new one. You will then cut any tie with any past liability that could arise with your sold property.

Originally posted by @Dennis M.:

which may mean paying closing on every property again and selling them to yourself !

That is where having all your properties in land trust come handy. You can assign the beneficial interest without any cost. You don't even have any reassessment if you are still the same ultimate beneficiary on both structure.

You can always go the land trust route. When you initialy deed your property to the land trust, you are the initial beneficiary and the Garn St Germain Act will forbid any due on sale. You can later assign the beneficiary to your LLC, as it is a private document, there would be no recording of it in any public records.

If your lender further down the road threaten to use the due on sale clause unless you can prove that you are still the beneficiary, you can always assign it back to you if needed at that time. It can be done in a minute and will only need a notary and/or your trustee signature in addition to yours.

That would give you some peace of mind.

Banks are really getting difficult with addresses when you open an account. They will request a physical address. A CMRA or a PO box will not work. A virtual office that is not listed as CMRA may work with some banks, and not with others.

You can use your physical Illinois address without problem. Then if you want later, you can add another mailing address of your choice that can be a PO box.

I would look at a slightly different structure.

First, each LLC that is a beneficiary of the different land trusts should be registered in the same state as the property. For any legal action regarding your property, you will have to be registered in the state (think eviction or any contesting of a code violation). They may also need to be registered in the state to collect rent.

You can keep the anonymity of these LLC through your NV (or cheaper WY) holding LLC that is anonymous and will be the only listed member on the different state registries.

I don't see the benefit of adding your ABC LLC layer.

However, I would create a C corp (or an LLC taxed as C corp) as an operating entity to manage the whole structure. It may also be used to collect the rent and do the property management, but you may need to have it registered in each state too. This C Corp will be used to write off your expenses and get fringe benefit like health care and qualified retirement plans.

Last I don't believe a domestic trust will create asset protection anymore as many case law have showed that it did not work. You would already have a very good asset protection structure with the LLCs.

For estate planning however the trust is a useful tool and would be the owner of your holding LLC.

You can also add an offshore layer with a Nevis or Belize LLC. You can add on top of it an offshore trust too.

However, for real estate, as it is immobile, the offshore is probably useless as your asset will be seized localy despite your claim that it is held offshore. Offshore is however a great tool to access foreign investment that are not directly accessible to "US person" due to compliance issue. It is also great to hold liquid asset like cash or stocks through an offshore brokerage/bank account, keeping it out of reach of US judgments. 

One more comment about offshore: it will not save you on tax (it is usually tax neutral) and will add a lot more paperwork and complexity to your tax return.

Cost wise, for a structure like described, I would estimate the domestic setup between $5,000 to $20,000 depending if you go the DIY route with minimum lawyer involvement or the get full package from an asset protection law firm.

The annual maintenance cost will probably be around $1000 to $2000 + cost of tax return preparation.

Offshore LLC may cost you between $1000 and $4000 to set up and around $400 to $1000 annually thereafter.

An offshore trust setup will be more expensive depending on the jurisdiction.

regarding the warranty deed:

https://www.youtube.com/watch?v=srTDquLh4e8

For the lease, if you want to use the LLC owning the property directly, then yes, it would be named on the lease. You won't own the property anymore, then you should not receive anything in your name as you would pierce the veil of your company and lose its liability protection shield. Be careful of the way the money flows. Why should you receive money from something that has nothing related to you? You are only a beneficiary of the LLC. Then you can only receive money from the LLC. The LLC owns the property. Then rents should go to the LLC. Keep separate bank accounts and do not skip a step.

The setup I am using with my rental real estate is a little bit more complex and is more geared towards FL issue with single member LLC weaknesses:

All my rental properties are held in their own FL LLC (through land trusts also, but for other reasons), all these LLCs are owned by a WY holding LLC.

I also have a FL C corp that is my operating entity. This C corp has a contract with each LLC as the property manager.

The FL landlord/tenant act specifies that the lease agreement should have the name of the landlord. The definition of the landlord is owner or lessor. So I can put my C Corp on the lease. My C Corp collect the rents, pays for all the repairs, bill, taxes, takes a management fee and pays the rest to the LLC.

My C corp is used to write off most of the expenses and also to give me fringe benefits like health care and to contribute to retirement plans. It may also help separating the liability between operation/ownership, but it is probable that everyone will be named in a lawsuit anyway. It adds to the complexity and requires another tax return and filing fee, but I believe that the cost benefit is worth it. It would probably be overkill for only one property, but if your portfolio starts growing it may be an option to consider.

You will find many contradicting opinions in this forum regarding the use of LLC. If you are disorganized, have trouble keeping proper records or don't want to deal with the complexity, then an LLC is not for you and using umbrella policy is a must for you.

In my case, I believe that I am borderline OCD and I love the intricate minutiae of having a very organized structure. I am also a DIY person and I had fun studying and researching all these areas. I drafted my structure, got some legal and tax advice feedback from attorney and CPA and set it up mostly myself. I spent some money on lawyers, books, training. Knowing what I know now, I could have probably saved some money in the process by avoiding some of my early mistakes, but the learning was welcome too. Regarding the yearly maintenance cost, it is not negligible, but I take it as another kind of assurance that make me sleep better.

Even with having this asset protection structure in place, I do have an umbrella insurance to protect myself from outside liability. I don't understand why some people are believing that you should have an umbrella policy or an LLC. They are two different tools that have two different goals. They can both protect you, but not in the same way nor from the same kind of threats. Your cost/risk assessment can make you choose one or the other, none or both. But it is always coming down to what you are willing to risk and leave unprotected.

With only one or two properties it is maybe overkill, and you will get probably a lot of opposite opinions in this forum, but for long term buy and hold, I am in the camp of having one LLC per property (of enough value) and one C corp as a management company. The management company is collecting the rent under an operating agreement with your LLCs. Your C corp is used for most tax write off of expenses, medical benefit and other fringe benefits. You can also consider using it to fund a qualified retirement plan. The gain are passed through your LLCs.

If you do some flips, you can add an S corp entity for them.

Also by separating the operation from the ownership you divide the liability risks.

South Carolina LLC statutes are not very asset protection friendly, and it may be better to use a SC Limited Partership instead, however that would create limitations on the passive loss. I would suggest looking at having these SC LLCs owned by a holding WY LLC. It would give you a layer of anonymity and add outside liability protection.

For putting assets in the LLC you just do an assignment that will be your contributions to the LLC. You are not selling your tools to your LLC, you are contributing them to its capital.

On the lease, your property management company would be the landlord (unless your State requires to put the owner on the lease).

First creating an llc is easy. You can do it yourself in a day or two online for a small fee. However the protection you will get from your llc will vary depend on the quality of your operating agreement. The ones provided by registrar services like legal zoom or other are ridiculously light and will be defeated easily in court. I would suggest that you get in touch with a real estate/asset protection attorney to draft one for you that you could reuse for all new llc after that. As a cheaper way you may use some of the templates sold by asset protection firms. Second, when you transfer your property to the llc please don’t use a quit claim deed. You may loose your title insurance. Use a warranty deed instead.

There is no such thing as being taxed as an llc... An single member llc is by default seen by the irs as a disregarded entity. A multi member llc is by default seen by the irs as a partnership. You can also choose to have your llc taxed as a c Corp or s corp if you make the election with the irs. It doesn’t change the fact that your company is still an llc. Taxation status and company legal formation are two different things. For a disregarded entity you will have no tax filing. For a partnership you will have to file a 1065 and issue K1 to its members.