Business Advice Request
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Business Advice Request (by WMH [NC]) Nov 12, 2020 10:46 AM
       Business Advice Request (by Sisco [MO]) Nov 12, 2020 10:59 AM
       Business Advice Request (by WMH [NC]) Nov 12, 2020 11:05 AM
       Business Advice Request (by Shaun [FL]) Nov 12, 2020 1:47 PM
       Business Advice Request (by S i d [MO]) Nov 12, 2020 1:59 PM
       Business Advice Request (by WMH [NC]) Nov 12, 2020 2:07 PM
       Business Advice Request (by Landlord ofthe Flies [TX]) Nov 12, 2020 2:12 PM
       Business Advice Request (by WMH [NC]) Nov 12, 2020 3:19 PM
       Business Advice Request (by Ray-N-Pa [PA]) Nov 12, 2020 5:16 PM
       Business Advice Request (by BRAD 20,000 [IN]) Nov 12, 2020 10:01 PM
       Business Advice Request (by BRAD 20,000 [IN]) Nov 12, 2020 10:15 PM
       Business Advice Request (by WMH [NC]) Nov 13, 2020 9:11 AM
       Business Advice Request (by Ray-N-Pa [PA]) Nov 13, 2020 2:15 PM
       Business Advice Request (by Sisco [MO]) Nov 13, 2020 2:29 PM
       Business Advice Request (by WMH [NC]) Nov 13, 2020 2:51 PM
       Business Advice Request (by Ray-N-Pa [PA]) Nov 13, 2020 3:33 PM
       Business Advice Request (by Pmg [TX]) Nov 13, 2020 4:39 PM
       Business Advice Request (by WMH [NC]) Nov 13, 2020 5:43 PM
       Business Advice Request (by Ray-N-Pa [PA]) Nov 13, 2020 7:06 PM
       Business Advice Request (by don [PA]) Nov 14, 2020 3:30 AM
       Business Advice Request (by Jim in O C [CA]) Nov 14, 2020 4:11 AM
       Business Advice Request (by Hoosier [IN]) Nov 14, 2020 10:22 AM
       Business Advice Request (by WMH [NC]) Nov 14, 2020 10:29 AM
       Business Advice Request (by WMH [NC]) Nov 14, 2020 11:00 AM
       Business Advice Request (by Hoosier [IN]) Nov 14, 2020 12:55 PM

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Business Advice Request (by WMH [NC]) Posted on: Nov 12, 2020 10:46 AM
Message:

So we got into this business slowly, as one does. Originally purchased with mortgages, one at time, in our own name, etc.

Over time we moved to cash purchases, still in own name.

Set up a website in a DBA name.

Finally set up a couple of LLCs and transferred ownership of most places (all those without mortgages - only one left!) into the LLCs. One of the LLCs is the old DBA name.

Then set up a trust to own the LLCs for estate purposes for the kids.

So the one LLCs is pretty well-known. It has a website and our vehicles have signs on them (needed it to get on the island during Covid shut-down!) Also all old tenants just know about it. And my email addresses have the name of it as part of address!

So now I think that LLC should not own houses, but should be the management arm. Transferring the houses it owns to another LLC would not be a big deal, I don't think: you don't have to pay transfer tax on those kinds of deed changes.

What am I not seeing? I will of course contact the attorney who drew up the wills and trust, just thought I'd ask the hive mind here.

There is no way to learn to just run this side of the business without just learning by doing! --50.82.xxx.xxx




Business Advice Request (by Sisco [MO]) Posted on: Nov 12, 2020 10:59 AM
Message:

If you manage property for other owners, It may be worthwhile to hold real estate in a separate entity. Otherwise, I see no asset protection advantage, just more regulatory chores and expenses. --67.43.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 12, 2020 11:05 AM
Message:

NO, we can't manage for others. In NC you need a broker's license.

I'm just thinking that having the third entity to do all the leases emails coordination of repairs, etc for our own properties. --50.82.xxx.xxx




Business Advice Request (by Shaun [FL]) Posted on: Nov 12, 2020 1:47 PM
Message:

WMH--When I set up my LLC, I set it up as the Landlord. It is in the Lease as the Landlord. It carries it's own Liability Insurance. It does not own any property. It leases the property from the owner, me. I originally was going to hold properties another way, like a trust, but when I discussed it with my attorney--everything is on Sunbiz, very hard to hide. --205.223.xxx.xx




Business Advice Request (by S i d [MO]) Posted on: Nov 12, 2020 1:59 PM
Message:

What's your end goal? Sounds like asset protection.

The folks who already know that you own the houses will still know that you own the houses. If there is litigation anywhere in the future, any competent lawyer will easily trail the leasing LLC back to the owning LLC and then back to you.

LLCs do not provide protection negligence and/or criminal activity. They exist to limit non-managing partners' liability to the amount they have invested. In this case, your property is the limit of your investment, and you are the only person who has anything.

Bottom line for successful asset protection:

1) Know and follow the law.

2) Respond timely to legitimate repair requests.

3) Buy $3-5 million in liability insurance. Should cost less than $1,000 / annually.

My business law Pro (a practicing attorney) said fewer than 1/2 of 1% of business owners ever get sued and found liable for more than $50,000. I imagine if you looked at only real estate investors, the percentage would be much lower than that. Think of all the high liability businesses like roofers, electricians, etc. that work day in, day out in dangers, and they are the ones "driving up" that percentage. --107.216.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 12, 2020 2:07 PM
Message:

No, the LLCs are not for asset protection. They are for estate purposes. I am not leaving all to all - the kids are getting getting individual LLCs, and the properties they own. This helps them avoid endless probate. That's the only reason, really, and sometimes, it helps to say to someone, "The company rules are..." that sort of thing. But property ownership is an open book here, and so is the ownership of each LLC. So asset protection is really insurance and doing a good job as much as possible.

It's just that I use the one LLC to do all the day-to-day work, and it's still my email domain, etc. So I thought if I kept this LLC alive but used it as the management side, makes lots of things easier.

I would create another LLC to hold the property.

I've contacted my tax person to ask her thoughts, and will move on to my attorney after that. --50.82.xxx.xxx




Business Advice Request (by Landlord ofthe Flies [TX]) Posted on: Nov 12, 2020 2:12 PM
Message:

Just another name to put on the lawsuit. Personally, I'd have everything under one LLC and in that LLC, I'd have a massive liability umbrella policy. If you split it up, you weaken the insurance and may need multiple policies for each LLC because insurance won't cover entities not named on the policy. With multiple LLCs, make sure all names are listed on the policy.

Unless you are trying to shield your properties from the management of other landlord's properties, I'd forget about it. --108.69.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 12, 2020 3:19 PM
Message:

Putting everything into one LLC defeats the estate planning purposes, doesn't it? --50.82.xxx.xxx




Business Advice Request (by Ray-N-Pa [PA]) Posted on: Nov 12, 2020 5:16 PM
Message:

Place the properties into a trust

Have the LLC manage the property

You become the employee of the LLC

You get asset protection, retirement, and estate planning --24.101.xxx.xx




Business Advice Request (by BRAD 20,000 [IN]) Posted on: Nov 12, 2020 10:01 PM
Message:

W,

Donít be afraid of probate. Thatís salesman talk to get us to spend money. --73.102.xxx.xxx




Business Advice Request (by BRAD 20,000 [IN]) Posted on: Nov 12, 2020 10:15 PM
Message:

Too quick...

Probate was simple when my parents died.

My generation saved a huge tax bill by

-testamentary trust (I donít know the current inheritance limits) the entire legal bill was $6000.

-stepped up basis. Keeping the assets in my name means my children will inherit my assets at their date of death value. If they sell quickly for that amount the sale will be tax free. The depreciation schedule also starts over at the DOD value.

If I add their name while I am alive and they sell after my death they will pay tax on the gain from the price *I* bought at years ago, and on the depreciation I took.

If the LLC owns the property...I donít know.

BRAD --73.102.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 13, 2020 9:11 AM
Message:

Houses are owned by LLCs which are owned by Trust.

CPA told me that if we set up a management LLC she would expect to see fees paid by LLCs, resulting in earned income and thus tax bill. She recommended not doing it. So there you go. --50.82.xxx.xxx




Business Advice Request (by Ray-N-Pa [PA]) Posted on: Nov 13, 2020 2:15 PM
Message:

Don't be afraid of a small tax bill.

Say that earned income is $10,000 in management fees. If you earn $10,000 and put it in a Solo 401K - is it fair to say that the company offer some type of retirement match as a benefit? Say 5% match. Suddenly your LLC is loosing money. Yes you end up having to pay some limited taxes on your earned income. But all that money that you earned is headed to your retirement account.

That is the reason why we put up with the day in and day out hassles - the end prize is retirement. Sure cash flow is nice.......make sure you have money for groceries, but I am not doing this for milk money.

I am doing this so I can avoid the snow belt for a few weeks each year and be able to retire comfortably --24.101.xxx.xx




Business Advice Request (by Sisco [MO]) Posted on: Nov 13, 2020 2:29 PM
Message:

W, your title to this thread is not on point.

You are strategizing successor planning and I imagine that the best choice method depends on each individual involved.

I advise you write out the different methods and have your attorney poke holes in each method until you hit upon the best fit for you. --67.43.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 13, 2020 2:51 PM
Message:

Sisco, already have the successor stuff set up, as noted. Trust owns LLCs, kids are beneficiaries of the Trust and the LLCs get distributed according to terms of trust.

My question was about a 3rd LLC, for management purposes only. CPA nixed the idea. --50.82.xxx.xxx




Business Advice Request (by Ray-N-Pa [PA]) Posted on: Nov 13, 2020 3:33 PM
Message:

Perhaps you could just change the sole member LLC to a multi-member with the other member being your successor.

Then you can sell the LLC to the replacement. That second person doesn't need to qualify for a loan --24.101.xxx.xx




Business Advice Request (by Pmg [TX]) Posted on: Nov 13, 2020 4:39 PM
Message:

as Sid said. too easy to pierce the veil. --107.77.xxx.xx




Business Advice Request (by WMH [NC]) Posted on: Nov 13, 2020 5:43 PM
Message:

Not worried about the veil! That can be pierced with two seconds of internet research.

Ray, it's not a sole member. We are both members (husband and wife.)

Don't need a loan.

I'm pretty confused by some of these answers, I'm guessing I worded my original question way wrong. --50.82.xxx.xxx




Business Advice Request (by Ray-N-Pa [PA]) Posted on: Nov 13, 2020 7:06 PM
Message:

There is money to be made by being able to structure deals so you can owner finance. A trust does just that. You can do it so the married couple are the beneficiaries and upon your demises - there are back up beneficiaries - your kids.

The beneficiaries don't even have to be human though- they can be non-profits. --24.101.xxx.xx




Business Advice Request (by don [PA]) Posted on: Nov 14, 2020 3:30 AM
Message:

WMH--"Piercing the veil" does not mean finding out who owns the LLC (or corp). It is a legal term that refers to when a court breaks through the protections against liability normally provided by those entities and place liability on the individuals that own them. This is done when the owners are sloppy and do not follow all the proper formalities such as accepting checks made out to them, corresponding as an individual rather than as the entity, etc. When the entity is underinsured the court is more likely to do so so that the tenant that suffers injury does not get "screwed" by the system. --73.141.xxx.xx




Business Advice Request (by Jim in O C [CA]) Posted on: Nov 14, 2020 4:11 AM
Message:

I hope you have sufficient umbrella insurance to cover any catastrophic liability claims. LLCís are good but not a guaranteed safety net. --99.23.xxx.x




Business Advice Request (by Hoosier [IN]) Posted on: Nov 14, 2020 10:22 AM
Message:

I can't answer your question directly, but overall wonder about giving one LLC to each family member. Have you asked your family members if this is what they want....to own rental property? Why not simply state that upon your death, all assets are to be liquidated and the proceeds split according to a formula you've devised? One other option would be to have all within the trust but say "Pete gets the deed to the property at 123 Main St, Suzie gets the deed to the property at 344 Jackson, etc."

My beneficiaries do not want a rental property...they are not landlords. They don't want the hassle of tenants, repairs, etc. I've written a document for my wife that has all key aspects of the business, listed 3 realtors I trust to sell the houses (in case some of them should die or move), and she knows our attorney and tax person.

Our plan is to get out of rentals before I get "too" old, so likely she won't have to deal with any of this, but just in case...I told her..."If I die early, liquidate the business and here's a template for how to do that". That document is part of our estate plan documents. --99.92.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 14, 2020 10:29 AM
Message:

We did not form the LLCs as a safety net. We knew quite well that they don't/won't protect us from liability in many cases, we heard Al Aiello speak many times.

So yes, we have general business liability and personal umbrella policies.

We formed them to separate the ownership of the houses to more easily leave them to the kids. Here, kid#1, you get this LLC, and kid#2, you get that one. Kid#3 gets other stuff.

Then we put them all in a trust with a pour-over will so the instructions for the above to happen are spelled out. Simple estate plan. That's all done.

The question I had about a separate management LLC was answered by CPA. Not worth it. --50.82.xxx.xxx




Business Advice Request (by WMH [NC]) Posted on: Nov 14, 2020 11:00 AM
Message:

The reason for leaving them separately is that two kids are already landlords and one would like to be. They are all adults. They've all seen the freedom it gives us, and I've taken two of them to Boot Camps and Conventions, too. (The oldest lives out of the country.)

We can also add property to each LLC (or sell some!) without having to re-write the will/trust. Which was what drove the idea in the first place: we had a will in place leaving deeds here and deeds there but it was quickly outdated.

The idea is that they will not have to clash over each property - they can keep or sell theirs according to their own wishes. If they get mad at anyone, it will be at us and we'll be gone. --50.82.xxx.xxx




Business Advice Request (by Hoosier [IN]) Posted on: Nov 14, 2020 12:55 PM
Message:

Thanks for clarifying...hope u come up with good solution --99.92.xxx.xxx



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