All Forum Posts by: James Miller

You definitely need to sit down with a lawyer to answer this question. Each state is different. 

Nevada is probably the strongest LLC statute from an asset protection and privacy standpoint in the country. Texas, Delaware, and Wyoming are also great LLC states too.

Having an out of state LLC be a holding company helps add to anonymity and to discourage lawsuits. The plaintiff's lawyer doesn't want to deal with multi state issues on a small slip and fall.

I run my law office's books with Ledger-CLI and GNUCash. What it won't do is your payroll and automatic 1099s and W2s so you need to know how to do that manually or have a service. I got tired of being nagged to death to upgrade every 3 months by Sage and Quickbooks that I ditched them. I like to use as much open source as I can. 

In TX we have this lovely new LLC called a series LLC so it lets a mom and pop get some of the benefits of the multiple company structure for the cost of one tax return and one trip to the lawyer's office. One series LLC on its own is not as good a multiple entity structure, but it sure beats the pants off of running your real estate business 'bareback'.

I am a Texas attorney, just not your attorney. 

You definitely want a lawyer to form an LLC or other entity structure. CPAs should practice tax, and lawyers should practice law. I've yet to see a CPA formed LLC in TX that had the same liability protections as a lawyer formed one. The non-lawyer services also typically do the bare minimum filings at the secretary of state. They leave out some key asset protection strategies.

Is the house paid off? Then the LLC is likely a no brainer: yes. If the house has a current loan, then there's due-on-sale-clause issues that may present a problem. If a future loan is contemplated, LLCs have to have commercial financing at higher interest rates, 5-10 year calls, and usually 10-20 year amortizations. (This means you get less cash flow on commercial lending, have to refi more often, but tend to pay down principle faster).

Insurance companies are in the business to collect premiums and pay the least amount (or zero) dollars on a claim. If you file a big claim, the company will be looking for ways to not pay or to minimally pay. So you'll be fighting a war on two fronts, defending yourself from the plaintiff, and trying to get your insurer to pay. Insurance is important, but it's just a tool in the tool-box. Not the only tool. In my short time here at BP, I've seen way too much reliance on insurance-only plans. People rely on insurance only and lose their personal fortunes when they find out the lawsuit they're facing is covered by their policy. A business structure might have stopped entirely or lessened the effect of that lawsuit. 

You should check out your target states and see if a foreign LLC can just 'own' property without having to register or pay any state-level taxes. If all the target states allow this, then you might be ok with your DE series single holding company. You might even be ok if you have to register it in each state.

Then, you could set up an Operations LLC in each state where you'll have activity and have that LLC be the one doing the deals, signing contracts, etc..

For my Texas REI clients, I advise against the holding company also being the operations company if they can swing the extra LLC. I also don't like one Series to be the holding company and one Series to be the operations company for separation purposes.

Sit down with a lawyer in your jurisdiction and discuss what he thinks for a structure. You really don't want to be DIY'ing a series LLC or using a non-lawyer; they're too technical.

You should talk to a consumer lawyer in your jurisdiction. They'll probably do a free consult. If there's a way to get the money out of the lawyer of the seller they might know. It might be against the law for the lawyer to hold earnest money without an escrow license. It might be fraud if the lawyer drafted the sales contract that way and knew there was a title issue when he took your money. You might be able to file a dispute with his state bar or local licensing agency. But, I'm not licensed in your state so I don't know what the rules are there. That's why you need to talk to a lawyer. 

You absolutely can do this, but make sure to use a competent real estate lawyer in your jurisdiction. Dodd-Frank act may apply, as well as your state version of SAFE. It's not as simple as a note and a deed anymore.

He needs to talk to a competent estate planning lawyer in his state. There are numerous ways to get around this if his goal is to get the properties to his family but they take time.

Each state is different. Some states require a registration (payment of a fee) to do business in that state. Some states don't consider owning property (as opposed to managing property) as doing business and don't require registration. 

You'll need to check with a lawyer in each state to see if you need to register.