All Forum Posts by: Scott Smith

I work extensively with these kinds of questions with my client, 100% of which are real estate investors looking to protect their assets. The answer is fact specific, so be careful when selecting an attorney that is not merely setting up the LLC but knows how to do the transfers and holdings correctly. Contact me offline if you want more details.

You can't form a Series LLC in MN, but you can use an out of state Series in MN.

The Series LLC gives you an infinitely expandable company, that you can create without additional filings, and without additional costs.

Contact me offline if you want more info. There is no reason no to do it.

@Brian H. I wouldn't use the Series LLC in California since franchise tax will kill you at $800 per Series, the same as the tax rate for an LLC. Instead, what I structure is a DST, when properly structured and managed, there is very good reason to believe that it can avoid franchise tax while offering you the protections of the Series LLC.

@Dave Toelkes I am unaware of any successful challenge to the Series LLC based upon the structure itself. We would expect a successful challenge based upon the same grounds as multiple LLC's (i.e. comingling assets).

@Matthew Kreitzer They should, it lowers the transaction costs for doing business structures that companies do anyway. Do you see any reason to not use the Series LLC over the traditional when the asset holdings of the Series LLC are within the risk tolerances of holding in a single LLC?

I'm a NY and TX licensed attorney and I specialize in Asset Protection (setting up these structures)

A couple things about this:

(1) Each state is different about the multi-member requirement. 

(2) Each state has different requirements regarding Operating Agreements and other necessary documentation to keep the LLC protections in place

(3) Part of Setting up an LLC is making sure that it will work right and that you manage that correctly. If you don't have an attorney instruction please do extensive research on the rules of your home state and review the case law regarding your company structure and how it is treated in the court.

(4) A poorly formed / managed LLC opens the door for massive attack since it is the door that opens up your assets. Likely this is a large pool that an attorney is willing to spend significant time since winning this point alone in a lawsuit provides significant leverage to a settlement since you are now more at risk.

(5) Insurance policies on your personal name and Company are great, and you definitely need to have one. However, it is a litigation strategy to make claims that intentionally are outside of the individuals insurance policy to compete with the individual instead of with the insurance company. In any event, if the claim is for enough money, you can almost guarantee the insurance company will deny benefits even if they rightly owe them to you.  For them, it is a business maneuver. 

Hi Tiffany,  my colleagues and I don't believe that the bank's threat is credible regarding accelerating the note and making you pay it all of. You don't see examples of banks foreclosing on a performing note based upon this issue since before 1960's. On a practical note, the issue is that it is bad for the bank's business to do this. If you want to know more please contact me offline.

The premiere in asset protection and anonymity for the California investor is the Delaware Statutory Trust. Delaware created it to prevent people from moving money offshore -- it is that strong. Also, since it is a trust, if it is properly structured and managed it may avoid franchise tax.

I'm happy to talk to you offline since these types of issues make up 100% of my practice. 

PLEASE UP VOTE IF YOU LIKED THIS POST

Always hide your assets, it doesn't cost much more to do so and seriously deters litigation (if they don't know what you own, they can't know if you are worth suing). Using multi-state LLC's and anonymity trusts will cause a serious pain for anyone researching you.

PLEASE UP VOTE IF YOU LIKED THIS POST 

There are some serious investor concerns with the TIC vs the DST. The DST is better for a number of reasons, though more expensive. The DST allows for a 1031 exchange into the DST without having to wind up a TIC each time an investor wants to exit and a new investor enter. This advantage alone creates substantial savings in terms of issues with financing, deeds of the properties, etc.

@Thomas Franklin thank you for clearly defining the issues. A thorough response as always.

I have my own take, and as any attorney will say, this is not legal advice...

For the asset protection purposes you need both (1) insurance and (2) properly structured company for litigation protection, an LLC/LP/etc.

Insurance protects your from nuisance that occur on the property; i.e. slip and fall

The company structure protects your assets from litigation liability; i.e. gross negligence (health and safety, alleged known hazards, fraud in the sale of the property) as well as someone getting to your assets by suing you personally (e.x. you got into a car wreck that exceeded the coverage of your policy, now they can go after your assets)

The due on sale clause is often a concern, but me and my colleagues view it as a very low risk for a number of reasons. This risk can also be further minimized by placing the property in trusts which appear to be for estate planning purposes but in actuality are in order to move them underneath the protection of your LLC. If you want to know more about this, please PM me.

IF YOU LIKED THIS POST PLEASE VOTE

Don't go cheap on the attorney, especially paying for consultations. They will pay for themselves many times over in the end of life expenses. Regardless if the government can't take the money, a comfortable end of life in this Country far outpaces the amount the government provides, and in the end you are stuck with the bill.