While many of these issues are important considerations and should not be ignored or overlooked, there are other more crucial criteria that you must question and evaluate first.The critical risk criteria that you must review and evaluate prior to making your final decision on which 1031 Exchange Qualified Intermediary to retain includes, but is not limited to, the following areas:Technical capability of the 1031 Exchange Qualified IntermediaryInternal processes and audit controls to safeguard your 1031 Exchange funds and assetsUse of Qualified Trust Accounts or Qualified Escrow AccountsDecision criteria and guidelines for investment of your 1031 Exchange fundsProtection from potential errors or omissions by the Qualified Intermediary (E&O Insurance) Protection from potential theft or embezzlement of 1031 Exchange funds (Fidelity Bond) An experienced and professional 1031 Exchange Qualified Intermediary will understand these concerns and should be happy to discuss these crucial issues with you.

The more units the better, because you are better protected when you have move-outs.  

Are your investments registered with either the SEC or with the California Department of Financial Protection & Innovation?

And what kind of protection are you referring to?

Regardless of which state you choose, be sure to maximize your liability on your renters policy and get an umbrella - this will protect you more than any LLC will. 

So I took my two paid off rentals and harvested the equity to scale up and increase my cash flow.

Protecting your asset is sometimes a  factor in an upgrade.

A well written management contract should clearly spell out what is expected of both the PMC and the owner, to PROTECT both and avoid misunderstandings.

Is it for liability protection?

It will protect you for cheaper without the additional complexity.