So as real estate investors, how do you know where to follow your LLC
in order to maximize your protection and the protection of your properties?
Well, in this video, I'm going to tell you exactly where to set up your LLC
and whether you should set up
an LLC for each property or whether it's okay to lump them all into one.
So let's get to it.
Henry one.
My name is Mauricio Rauld, and I'm Ken McCoy's legal advisor.
This question was actually submitted by Lewis,
and it's an excellent question, which is going to help us
answer the all important question of where do I set up my property LLC?
And if you'd like your question to be answered in future videos,
drop your question in the comments
and if you find value in this, please like and subscribe.
So what was asked?
I'm looking in California
and I have five investment properties in Texas and two in Austin.
In which state should I file the LLC that can provide maximum protection?
Great question.
This is going to be much easier if we have a diagram.
So let's take a quick look at my impressive diagram skills.
So I actually misread.
Lewis's question and he actually has five properties in Tampa, Florida,
and two of them in Austin, Texas.
And so what I always recommend my clients is to always set up your property
LLC in the state where the properties are located.
So in this case, I would set up the LLC in Florida,
you could set it up in another state like California,
since that's where you're from, or Nevada or just any other state.
But you would. Have to still qualify that.
LLC to do business
in the state of Florida and register that LLC in the state of Florida.
So you're actually having two separate sets of.
Filing fees, two sets of maintenance fees, and there's really no additional benefit
because if anything were to happen to any one of these five properties,
then let's say there's a slip and fall or a boiler explodes or whatever
accident happens, then Florida law is going to apply
because that's where the accident happened.
So there's really no asset protection benefit
to setting this particular entity up anywhere else.
And the same thing with Texas, the Austin Properties.
I would just set these up in Texas LLC and put both of them in there.
Now, is it a good idea to put all five of them?
We'll address that at the end of the video,
but for now I would be recommending setting up your Florida LLC, Florida
Properties in Florida LLC and your Texas properties in Texas.
Now for the ownership of these LLC,
I would definitely not have these in your individual name,
especially if you live in the great state of California,
which is probably the worst asset protection state in the country.
These two properties LLC, would be owned 100% by another LLC
that you own, that conducts absolutely no business.
It literally just sits there
holding the ownership interest in the Florida LLC and the Texas LLC.
It doesn't perform business anywhere else in the country.
These classes are typically referred to as holding companies
and are set up in the state that has the best asset protection
laws in the country, which typically are Wyoming,
Nevada or Delaware, which is probably why you've heard those three before.
This way, if something were to happen to you, irrespective of your properties,
you got into a car accident, a business dispute
or what have you, and there's a judgment against you personally.
Then when it comes time for the creditor to come after your assets
that are inside these Florida and Texas LLC,
Florida or Texas law wouldn't apply,
but Nevada law would apply, or Delaware or Wyoming law,
whichever state you set these up and these three states
make it very difficult for creditors to read your assets.
So in some property losses are set up in the state where the properties are located
and the holding company is generally set up in a premier asset
protection state like Nevada, Wyoming or Delaware.
But is it smart to put all five properties into that Texas LLC?
Here is what you need to understand.
If something happened to one of those Texas properties
and the Texas LLC would be legally responsible.
And anything inside that LLC would be fair game.
So all five properties,
any money in a bank account and any other asset that the Texas LLC owns
in an ideal world from an asset protection
standpoint, each property would be held at its own LLC.
So you would end up with five Texas LLC with one property.
Each of those LLC
that way, if something were to happen to one property,
the other four would be insulated
and only that particular Texas LLC would be responsible.
Each LLC costs money to set up and to maintain.
However, the challenge is the cost.
Each LLC costs money
to set up and maintain and in some instances have to pay taxes.
How are the challenges cost?
It costs money to set up the LLC, maintain it, and sometimes
the LLC even has to pay taxes and so it gets cost prohibitive.
If there isn't enough equity to justify those expenses,
you typically decide on your own or with the assistance
of your asset protection attorney,
how much equity you're comfortable in losing in that particular LLC,
For example, if all those five properties have, let's say, a $100,000 in equity,
but your net worth is 10 million,
then it probably doesn't matter too much and you can put them all into the LLC.
On the other hand,
if that's all your net worth, you probably want to separate those.
Out into separate LLC.
What I tell my clients, and it's less about the
amount of properties in each LLC, but more about how much equity is in.
Each of those losses.
On this particular example.
And generally speaking, you're probably going to see
at least two losses, one with three properties.
And the other with two.
All right. Well, that's that's. It for this one.
Jerry, I would suggest can you do this for future videos?
But I'm just going to kind of do an end card and point to a video.
And but I think Kenny.
Should record kind of if you look at the value.
Tainment
Pat does at the end of every video, I think it'll help.
So I'm just would say
if you like this video, here's another one and I think you would enjoy
and I think there's one yeah, just maybe enjoy
and we can maybe maybe we we point to the asset protection
I would assume the asset protection for real estate investors.
If you like this video.
Here's another one on asset protection for real estate investors.
If you like this video, here's another one on entity structuring
for real estate investors.
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