All Forum Posts by: Sean Morrison

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

It's time to seriously start talking to an asset protection attorney. The current structure you described has a number of problems. And there seems to be some confusion about how some of these tools work, and how they work together. For examples, a DE series LLC still needs to register in the state in which the property resides. Thus, it's generating fees in both states. In addition, with properties in multiple states, there is an added estate planning problem of multiple probates if something were to happen.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

The answer is yes to most of your questions. What form you file would depend on how the trust is structured. This is not a DIY project - you need to talk to a trusts attorney about this as it will have ramifications on taxes, legal matters, etc.

Disclaimer: I am a Louisiana attorney, but I am not your attorney. This is not legal advice, just friendly information.

Any time partners are involved, even if they are family, an agreement needs to be put in place outlining work, distributions, and what happens on sale or dissolution. And making that agreement an LLC instead of a partnership provides some asset protection to both parties. Much will depend on the purpose of the venture - is this a flip and sell, or will it be a rental? Keep in mind that in order to enjoy the protections of the LLC, the property will need to be deeded to the LLC.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Having multiple LLCs is just one asset protection strategy, umbrella policies are another, and you can mix and match depending on your risk tolerance. S-Corps are not great for real estate holding because their corporate status makes transfers much more difficult and taxable. However, it sounds like you're dealing with more than just a buy-and-hold portfolio. When dealing with private equity and other business ventures, the answers can be very different. Depending on the type of ventures you engaged in, it's usually best to have separate entities for passive income (rentals) and active income (wholesales, flips, other business).

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

It sounds like you're living in the other half of the duplex. In order to gain any liability protection from an LLC, you would need to deed the property to the LLC, which gets into due-on-sale issues with the mortgage company (see the many threads on that issue). As an LLC, you could lose any homestead exemptions for property taxes. Insurance rates (both homeowners and flood insurance) could go up significantly. But if you want to do it because you have significant liability concerns, then talk to an attorney first.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

Technically you can put multiple businesses under one LLC, however, as mentioned, it's not the best way to go. One, from a liability perspective, a problem in one business could then carry over to the other. And two, it's best to keep your active income (clothing) separate from your passive income (rentals) for cleaner tax reporting.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. The catch with California is that they will want all those LLCs to register as foreign companies doing business in CA, and charge $800 per year for each. If many investments were in one particular state, a single local LLC could suffice to save money.

@Kelly Pierce, the Delaware Statutory Trust is a completely different beast than what the OP was discussing. The DST is commonly used for real estate syndications where the investors also do 1031 exchanges. The revocable trust OP mentioned is an estate planning tool to avoid probate courts on death. It doesn't offer asset protection, but is extremely useful if you have properties in different states, since otherwise it's a probate case filed in each state. But with all things estate planning, it's extremely local as the laws for each state are unique. So while many attorneys could help with the DST, you would need a local attorney for anything estate planning.

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information. 

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. If you want one as a holding LLC, you could do that, but it's just more paperwork.

Series LLCs are great tools, but they're really only good within that state. Using a series outside of the state is simply unknown territory. 

How large is your portfolio currently?