All Forum Posts by: Sean Linnehan

 Not quite -- I have one entity for each property or state (depending on risk tolerance), but only one holding company at the top that holds them all. All of the operating LLCs that hold the property(ies) are wholly-owned by the holding company and are disregarded entities for tax purposes. This means they all get rolled up to the one holding company LLC for tax purposes, which means just one 1065 and K-1. This means there is not really much of a difference for tax purposes. I end up paying a bit more in LLC registration fees by having more than one (talking a few hundred dollars), which in my opinion is well worth the risk mitigation for a large loss (see my hypothetical to Nathan in a separate response above).

And to your point on waiting to break out until you reach $5M in net worth, I pose the same question to you as I posed to Nathan above. 

Thanks.

Thanks for the post Nathan. I follow your point, but I want to drill down a bit. Wouldn't that approach would be more risky in the event of a large judgment? I would think this would be a risk-appetite question that is particular to each investor. Some investors may not opt for the operational efficiency at the expense of increased risk. 

Here is an example to illustrate what I mean (using round numbers for clarity, but would work with any figures depending on the investor's materiality threshold): Let's say I have 4 properties each worth $500K and I have 25% equity in each (total of $2M in property and $500K in equity). Let's say I combine them into one LLC and take out a $2M umbrella policy. For any judgment covered under the umbrella policy (or other insurance) that is less than $2.5M, I would be fine because I could pay the judgment entirely with the policy and the proceeds from the sale of 1 property. However, for a judgment greater than $2.5M (say, $5M -- not unrealistic for a serious injury or death), I would lose everything in that scenario because the judgment creditor could come after all of the assets in the LLC after the umbrella policy caps out. If I had kept each property in a separate LLC, the creditor could only come after the umbrella policy and the one property involved. I would lose $500K in equity in the combined LLC scenario but only $125K in equity with separate LLCs.

Each of my rental properties is held by its own LLC, and each LLC is owned by a holding company that sits at the top (which is owned by me). Each LLC needs its own bank account, but as I scale, I am looking for a better bank that allows me to more efficiently manage multiple bank accounts. I currently use Bluevine, but I have separate logins for each account, which is cumbersome. I would like to have one login where I can access multiple accounts from the same dashboard, or something similar. Curious how other investors with multiple bank accounts handle this and any recommendations for banking institutions you may have. Thanks!