All Forum Posts by: Mike S.

@Manas M.

Instead of registering your LLC in two states where you will have to put your name on public records in the second state, it is often recommended to open a separate new single member, member managed in the second state, where the member is the holding anonymous LLC. The cost for a new LLC or a foreign registered one is often quite similar. But you get the anonymity that way and also add another layer of asset protection.

Nevada has become expensive and I believe would need a nominee each year for renewal. Wyoming has also very strong asset protection statutes and is much cheaper. It is now the most recommended jurisdiction for this type of holding. Nevada is still used for corporations or other entities where you attract other people’s money as they have very good shareholder protection features too.

@Chasing Vega

I don't believe that you would have any liability if you are not and we're not involved with the lease nor the LLC.

However if the tenant sued the LLC and win, he may get a judgement against the LLC and get the property and or the LLC. During that a time, you will still be responsible for the mortgage payment but will not receive any money from the LLC. If the property is foreclosed and the bank does not get its money back, you will still be financially responsible to the bank for any shortfall, and your credit score will also get to the drain.

So maybe not liable but definitely impacted.

When I started my journey into asset protection, I wasted a lot of money with a local "asset protection" attorney firm that was pushing their structure without explaining the reasons why, nor answering my questions about my current plans. Then I discovered the free Clint Coons Youtube channel that answered most of my questions. I wished that I have found Anderson Advisors earlier as it would have saved me a lot of money.

There are a few other law firms that are well versed into asset protection for real estate investors. But one of the great plus of Anderson Advisors is that they have under the same roof asset protection and tax attorneys that are working together to make a plan that get the best of both world.

They are not the cheapest around, but so far I believe that I had a fair return on the money that I spent with them. Especially if you are growing, they have great bundle offers for unlimited number of entities. They also have a program where you have unlimited access to their attorneys for a monthly subscription price.

I am not affiliated with them, but I am a happy customer.

It depends what you want to do.

You can have a life insurance owned by the company on the life of each partner, with the company as beneficiary. If the partner dies, the money paid to the company will give enough cash to buy back the membership from the estate of the deceased partner, avoiding to have to sell the assets to satisfy the heirs.

In that case, it is even better to have a maximum overfunded cash value permanent life insurance, as the cash value could be used as collateral to fund other projects.

If you are looking at giving a bonus to the partners, then you can buy life insurance owned by the company. After a few years you will transfer ownership of the policy to the partner.

There are multiples ways to look at it. Check also with your CPA as depending on the way you structure it you may or may not have deductible expense for the premium, and may or may not be taxed on the proceed of the insurance.

Look at third federal, they have high LTV and low rate on Heloc for primary residence.

Originally posted by @Jim Kindred:

The problem with using IUL's for lending strategies is not just the "slight volatility" but the lack of guarantees and the ever increasing cost of the insurance which is the primary guarantee of IULs and that is the costs are guaranteed to increase year over year, and they can not be leveraged like whole life can.  There is a reason why banks won't allow you to leverage them, and it has to do with the lack of guarantees. 

You can get a policy loan on an IUL the same way than for a WL. In fact, on IUL, most carriers have policy loans options that have often better rate than the ones found on WL policies.

You can get a bank loan on an IUL, but it is true that you will find less lenders than for WL.

Originally posted by @John T.:

@Mike S.I assume we have to set up a bank account for each LLC , which could be a nightmare if you have considerable portfolio.
or perhaps we only need the WY LLC to have a bank account ?  Still I little bit confuse about this .

It is better to have a separate bank account for each entity. It will help keep your company veil. But you can also create a property management Corp that will collect all rents and pay all expenses for all the properties, and quarterly for instance, transfer back the surplus to the owner entity. You can use that corp to get fringe benefits, salary and contribute to a retirement account if you need to. Each LLC will contract the property management Corp to manage the properties and will "pay" a fee for that job.

It is not a big hassle to have multiple bank accounts if they are all at the same bank. You can do online transfer instantly from one account to the other. And by using a property management corporation, you only need one credit card and one check book for that account; the rest is only done online.

Originally posted by @Eamonn McElroy:

@Mike S.

You're not understanding what I'm conveying.

Google "does an LLC protect a managing member from torts committed in their individual capacity". Some reading might be in order.

As I wrote you can and will get sued personally for tort committed in your individual capacity. Now if you get a judgement against you personally it will get attached to your personal assets. If the only asset that you own directly is a WY LLC, the only thing that your creditor can get is a charging order, ie if you take any distribution from the WY LLC, this money should go to the creditor. However the creditor can not take your ownership of the LLC, nor get any power of direction or force its foreclosure. If your operating agreement has been properly written, it will state that you don't have to take distribution if you don't want to. All your sub LLCs will be owned by the WY holding and not by you personally, so again not reachable by your creditors.

On the other hand, if you did not properly set nor operated your LLC by treating it as a business, you may have pierced its veil and a case can be made that the LLC has become your alter ego and as such could not benefit from the charging order protection. So a minimum of formalism and good operating agreements are a must to keep that protection.

Same if you have an inside liability tort claim coming from a property, but not you personally, a judgement against the owner of the property (the sub LLC), will attach to all the asset of that LLC but will not reach the owner of the LLC (the WY LLC). So you want to separate each asset into its own sub LLC to limit the risks to only that asset.

Originally posted by @Eamonn McElroy:

You should do some research about whether these complex structures protect a managing-member from torts committed in their individual capacity as manager.  It might change your opinion about what's really necessary.

You can always get sued personally for anything. That is where you want your different assets to be protected from outside liability. That is why WY is often recommended as the holding as they have excellent charging order protection, and a judgement against you personally would not reach into the WY LLC. On the inside liability side, you can always lose all the assets inside one entity. But that will be limited only to that entity and will not propagate to others.

I have been using different lawyers to set up my current structure, and I wish that I had found Clint's law firm earlier as it would have saved me thousands of dollars wasted with some local 'asset protection lawyers' who were pushing one type of strategy without being capable of explaining to me the advantages of their setup compared to what I had envisioned initially.

Anderson Business Advisors is not the cheapest outfit on the market, but they are excellent at teaching their methods, and best of all they have under the same roof accountant and lawyers who brainstormed to get the best of both world. If you have multiple entities, they offered bundles and unlimited offers that have a high entry fee but may be way cheaper per entity.

I have used their entity creation services but I have not used their accounting and tax services yet. I am also using very frequently their Platinum Service to get answer to my legal and tax questions for a cheap monthly subscription fee. When you will have a better idea of what you would like to do, I would suggest that you schedule a 30 minutes free strategy session with one of their lawyers to get a blueprint of your structure.

Pro:

cheaper to create and maintain (state fee) 

You can have multiple child LLC on shelve ready to be used for no cost.

You can in theory have only one bank account for all the LLCs and only separate them on paper with excellent bookkeeping.

Con:

Not recognized in all state, and interpretation of their separation may vary in foreign jurisdiction

Relatively recent and not a lot of case law

Specific operating agreement needed and not all lawyers are very familiar with it

May have some issues when dealing with title or banks who are not used to them.

May lower some of your anonymity as will link all the series together.

I do have some series LLC and also some vanilla LLCs. Both of them have their use depending on the jurisdiction, type of assets that you use them for and level of protection you are looking for.