Legal and LLC setup for Real Estate
IANAL by the way and you should still follow up with a lawyer to set the stuff up.
However, here’s some fun rich people advice for asset protection. This is part of the reason why no one actually knows how much Donald Trump is worth.
LLC in which states?
If you must, get a holding LLC in WY or NV with anonymity and charging protections, and use that holding LLC as the manager of the LLC that houses the property of the state you’re in. If you put yourself as the manager of the LLC in California for example, people will still be able to track you.
Why you use an LLC in a state with charging protections?
Only a handful of states have charging protections and full anonymity. Wyoming for example is able to completely hide the identity of anyone using the LLC. To be sued, they would have to hire a WY lawyer and the lawyers there know that (expensive)
Charging protections allow you hide your LLC from outside injunctions and are only worth it if you have a lot of equity to protect and risky other businesses.
For example, one of the investors I have might run a restaurant in California in their personal name (landlords will sometimes require this), in which you run into a lot of lawsuits. If someone stubs their toe at the restaurant, they could sue the investor, and the judge can actually place a stop order, or force a sale of all the other assets the investor owns even if they’re in an LLC to pay back fees. LLCs by default only protect from lawsuits within the LLC, not from outside. States with charging orders prevent outsiders.
Why is anonymity important?
Being able to hide our identity means pursuing attorneys might not bother chasing it because it isn’t worth the money/investors might not own much for them to take/LLC is properly structured for asset protection. When injury attorneys go to see who owns the property of 123 California street, they’ll see that it’s owned by 123 Cali LLC. When they go to inspect who manages 123 Cali LLC, it’ll show that it is managed by 321 WY LLC at which point most of them will give up because they won’t be able to track anyone in the LLCs.
Believe it or not, those guys on the billboards will hire private investigators to track the net worth of people they're interested in suing. Would they really want to tie themselves up in court for something they don’t know the payout of and against owners (who are anonymous) that might have better lawyers than they are?
Do you need an LLC?
Do you have a significant amount of equity you want to protect? If we’re currently purchasing projects worth about 5m, 1m in equity can be taken. Paying 1000/LLC to a lawyer to help set everything up is worth it to me + extra cost of accounting and filing each year.
Do you run another business where you engage significantly with possible lawsuits? If so, you’d want some thing with charging protections
Are you trying to protect homes under conventional loans. The ones backed by the government, the generic ones you get for your house. 30 year fixed rate. Banks might call you on your loan to pay the full amount. Banks don’t like lending to LLC so you probably won't be able to refi
Do you not have much to take and Umbrella liability insurance does the same?
Then don’t get the LLC. You don't get much better write-offs in taxes