Seems overly conservative. Why "go overboard" and create an LLC when I have insurance on the rentals I own? Seems like the chances are slim and none that I'd have a problem on one of my properties that would exceed the insurance policy I have. Does anyone have opinions one way or the other...or horror stories to share?
2006-07-05 14:47:49 · 8 answers · asked by rcarltonr 2 in Business & Finance ➔ Renting & Real Estate
If the property is in your name, a person can sue you for everything you own. Everything. Also, if there is a claim on your insurance for one property, it can affect your future insurability on the other properties including your personal home. It is rather easy to set up an LLC and generally inexpensive even if you don't set it up yourself. Why leave yourself vulnerable? I would say it is better insurance than actual insurance is.
Good luck!
2006-07-05 15:01:33 · answer #1 · answered by luxury6 2 · 0⤊ 0⤋
If you have sufficient general liability coverage to protect the value of your properties, then incorporating may not be worth the expense. This is NOT the same as the dwelling/fire insurance on the properties!
For instance, let's say that you loan your car to a friend who has been known to drink a bit too much on occasion. He swears that he won't be drinking and you believe him. Now say that he gets trashed and takes out a family of 6. Even ignoring the knowledge that he gets drunk occasionally (but the lawyers won't, I can assure you!) as you are the owner of the vehicle, YOU can and will be sued. Let's say for sake of argument that the judgement is for $1 million. Your friend is a working stiff with no assets and not enough income worth garnishing. You, on the other hand have "a few rental properties" to use your own words. Well, now you HAD a few rental properties. Unless, of course, you had a nice fat general liability policy for $1 million or more. Or unless those "few rental properties" were actually owned by a corporation, not you.
Ideally, you'll have that insurance policy AND your assets will be shielded from judgement.
Get the picture? Good! My work here is done!
2006-07-05 22:18:04 · answer #2 · answered by Bostonian In MO 7 · 0⤊ 0⤋
YES YES YES. A LLC/Corp./ INC. done the right way will protect you as an individual. I believe you must have corporation "s". This will keep you safe from any financial burden. You need to seporate yourself and your family from buisness details. If you foreclose or bankrupt they can not take all personal belonging including cars and some money. Keep investigating and protect youself. The Real Estate market is not in favor for many right now, lots and lots of foreclosures/Chap 11. A LLC/Corp./Inc. or any version of should cost about $300-$500. I think well worth it. I am being foreclosed upon as we speak.
2006-07-05 22:18:28 · answer #3 · answered by Anonymous · 0⤊ 0⤋
If you have properties that have alot of equity it is strongly recommended to incorporate LLC and FLP.Seek a Real Estate Attorney for more advice.Just because you have insurance will not say you will be covered.What if the properties are in your personnal name and there are lawsuits,judgements,levy etc.All ALL your properties could and will be wiped out.Look up Robert Bluhm,JD for Total Asset Protection Stragegies 1-866-952-3600
Good Luck.
www.foreclosureavoidance.ws
2006-07-05 21:57:08 · answer #4 · answered by innovativeinvest@sbcglobal.net 2 · 0⤊ 0⤋
Get Million $ G/L Policy also Umbrella Policy added above this
2006-07-06 04:52:49 · answer #5 · answered by Anonymous · 0⤊ 0⤋
An LLC is common if you have partners, if you don't then create an S-Corp.
2006-07-05 21:50:15 · answer #6 · answered by Not Tellin 4 · 0⤊ 0⤋
I'm sorry, how big of a bullseye did you want to paint on yourself?
Regards
2006-07-06 00:13:38 · answer #7 · answered by Anonymous · 0⤊ 0⤋
Consult your tax accountant.
2006-07-05 21:52:01 · answer #8 · answered by Diane D 5 · 0⤊ 0⤋