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single member llc for real estate

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  • single member llc for real estate

    Hi, I am a physician in Florida and looking at buying some single-family homes for rental/investment.

    I currently don't have a business partner and would be doing all the financing/investment (and probably the managing) myself.

    Obviously I will talk with a lawyer or cpa, but wanted to get input from this group as well.

    I know I need an umbrella policy, and I was planning on putting the properties in one (or more) LLC's.  My question is -- as the only member of the LLC, if I get sued for malpractice, does the LLC protect my properties from being taken from me?  Do I need to find a partner for my LLC in order to have better protection?

    Thanks for your help!

  • #2
    I have all properties in an llc with the intention that I’m protected from the inside-out. Tenant sues or someone sues the properties within llc.. they can only go after what the llc owns. I don’t think it works the other way around.. from the outside-in as you own the llc? Like to see what the lawyers say? If you’re maintaining the llc.. make sure you keep all personal finances separate from the real estate or llc finances, maintain periodic minutes, and have an operating agreement in place. Otherwise lawsuits can potentially pierce the corporate veil from the inside out to you personally.


    • #3
      1.  Yes, umbrella

      2.  have to set it up right-- real estate lawyer.   single llc is fine

      3.  if you manage it, you have to be careful on the separation.   Best and easiest is to get someone else.

      4.  meetings; agendas; postimngs - direction to the manager.   business is calling the shots, not you as a person



      • #4
        If you're going to be managing the LLC and properties yourself, I'd be very careful on the management end. If your tenants find out you are the owner and are a doctor, it could be a double whammy in court. I run my business as the property manager (versus the owner). Though, I'm not the doc (spouse). If you want to protect your identity and yourself, you may want to hire out the property management or have someone else manage the properties. Good luck!


        • #5
          The LLC may provide you "limited liability"--particularly if the the LLC is a partnership and not single member. In other words, if your tenant sues you, they may not be able to get at your personal assets outside of what's in the LLC (depends on the strength of charging orders for your state). You are the owner of the LLC, so getting sued by your patients is a little trickier. It's your asset and things that you own are certainly a target for creditors.

          Admittedly, the LLC laws are tricky and relying on them solely to protect my assets does not let me sleep comfortably at night. I own a lot of real estate and I use a strategy called equity stripping. I have a Wyoming LLC set up that "loans" money to my entities. The amount loaned is typically in excess of my equity effectively removing the "target" from creditors.

          Say for example you have a house with a mortgage of $80K and 20K equity. The equity stripping company would then issue a lien for 20K or more that is real and searchable when someone looks for liens and UCC filings (typically what a lawyer will do before taking on a case for a client). That makes your house look like a turnip to someone who wants to sue you and get their hands on it.

          A lot of real estate investors use this strategy and it is highly effective. Now...the question is that if someone really digs and finds out you own the company, it may not hold up in court. But of course someone else (like your wife) could own the company and make it more real.

          In my case, I have taken it to the bulletproof level. I have an offshore trust that owns the Wyoming LLC. Now, even it was known that I set it up, it doesn't matter for legal purposes. the law recognizes ownership from either individuals or trusts. You are not your trust. So if the trust owns the equity stripping company, you are untouchable.

          If you want a referral to my asset protection attorney, let me know.


          • #6
            A single member LLC does NOT protect you from creditors.   See (for example)


            A multimember LLC will offer charging order protection, especially with an executory operating agreement (lawyer stuff).


            • #7

              A single member LLC does NOT protect you from creditors.   See (for example)

              A multimember LLC will offer charging order protection, especially with an executory operating agreement (lawyer stuff).
              Click to expand...

              You should not make such a blanket statement about LLCs or any other legal issue. Your link specifically applies to Florida.

              There are several more states that do not provide LLC asset protections to Single Member LLCs. However, the majority of states do not distinguish between Single and Multi-member LLCs and provide full protection to SMLLCs.

              The answer as always is to consult with a small business attorney in your state. Only they are going to know the ins and outs of not only your state's statutes, but specific and related precedence.


              • #8
                I don't know Florida LLC law (I bet Steven does though) but in general a multi-member LLC offers more asset protection than a single member one.
                Helping those who wear the white coat get a fair shake on Wall Street since 2011


                • #9
                  I meant to be specific about Florida, thanks for the clarification (the link I included was Florida specific, even in it's title).  I find that with my background as a physician (who was once sued) and with a lawyer/CFP employee, that we usually know more about asset protection in Florida than most of our client's attorneys.  I do agree that in most cases, a good estate planning attorney is the best source for state specific information and opinions.