Hi Lee Phillips here. Welcome to my YouTube channel.
I'm an attorney and I want to talk about a question that I get quite often.
The Guru's tell you that you should put each one of your real estate investment properties in a different LLC
and is that good?
Yeah, that's good from an asset protection standpoint
no question that it's better to have one egg in each one of your baskets
instead of a bunch of eggs in one basket
basically the concept.
However, you can't manage the paperwork associated with six trillion LLC's.
If you've got twenty properties and you've got a separate LLC for each property
you're gonna drown in your own paperwork
now the lawyers they'll love to do that for you
because they get to then charge you for 20 LLC's
Great deal, right?
Yeah, if you're the lawyer.
Well, you've got to get a tax ID number you've got a file a tax return
you've got to do the paperwork with the state and pay the fees
and if you're in one of those "foreign" countries like New York and New Jersey and California
then you're paying a lot of money for one of your LLC's every year in the state fees.
So these all add up.
If you've got twenty California LLC's, you're looking at, what?
Like $17,000-18,000 in legal, in state fees every year.
You can't do that.
But in addition to that you can't do the paperwork
you just drown in your own paperwork.
So what I suggest is is that you make a logical division of your properties
and create a basket to hold those kind of properties
create another basket to hold a different type
If I've got three single family rental units and one apartment
fine, let's put the apartment in one LLC and the three single families in another
or if I've got some high-end single families, let's put those in one
and if I've got a bunch of Section 8 low-end stuff let's put them in another one.
Divide up logically.
If I've got some properties in Ohio and some properties in Florida
let's have one in Florida and one in Ohio
by the way refer to the YouTube on where do you put your LLC, which state you put it in
you're gonna have to have an LLC that's in Ohio that registers in Florida
or you're gonna have to have one in Ohio and one in Florida
your LLC has to have a presence in each state
a legal presence
in order to exercise the legal rights afforded that LLC in that state
no official registration, no rights.
that's another story
but as to how many LLC's make logical decisions
and then form LLC's based upon those logical decisions
and if you've got twenty residentials
well that's probably too many for one LLC
four or five million dollars in assets
I've heard that, I've said that
but just make it logical
I mean if one of your rental properties is in a real risky neighborhood
and everybody in that neighborhood sues everybody else
fine, put that one in its own LLC
because the assets in that LLC are subject to the liabilities that each one of those assets create.
That whole basket is at risk.
I can't really give you more information than that
because I don't know your situation
but you can think it out, you can do it.
Just be logical and don't go overboard
I had a couple of doctors from Long Beach call me up long ago
and they said that one of the lawyers had talked them into doing a different family limited partnership
that was what we often used before LLC's
don't use the family limited partnership anymore, use the LLC
but the guy had talked them into setting up 53 limited partnerships and
he only charged them $5,000 PER limited partnership
and he had said you don't want these family limited partnerships
to be in California because it's $850 a year for the filing fee
you want them to be in my state and you need a registered agent for that state
so I'll be your registered agent and in fact I'm an accountant too
I'm going to do all the taxes
and I know I've told this story before on my YouTube channel, but it makes the point
he only charged them $1500 to act as the registered agent and to do the taxes
that's $1,500 PER family limited partnership
I don't know if you're doing the math but these two doctors called me up
and they said Phillips, we're not worried about asset protection anymore
our lawyer has all of our money
how do we get out of this?
So don't go overboard. Be logical.
This is Lee Phillips talking about
how many properties or how many LLC's you have if you're a real estate investor