The first rule is to title all real estate that you own or co-own –
other than your personal residence – to one or more limited liability
companies (LLCs). This includes land, vacation homes, timeshares, rental
and commercial properties. Why is the LLC the ideal entity to own your
investment real estate? Because it protects the owner(s) personally from
liabilities originating from the property (as would a corporation), and,
as importantly, it shelters the property and your interest in the LLC
against claims by your personal creditors.
There are several other reasons we prefer an LLC over either a corporation
or limited partnership as the entity for investment properties. You avoid
double taxation with a limited liability company. Since the limited liability
company isn't usually taxed as a corporation, you avoid the corporate
income tax. Limited liability company income is usually taxed personally
to its members. You also avoid personal liability with a limited liability
company -- LLC managers and members are personally protected from the
LLC's creditors, even when the LLC members manage the company. Conversely,
general partners of a limited partnership
arepersonally liable for partnership debts.
For maximum protection, your LLC should have at least one member aside
from the lawsuit defendant member. Courts are reluctant to expand upon
a creditor's charging order remedy when non-debtor members would be
affected. Conversely, courts are more likely to liquidate a single-member
LLC, or allow foreclosure or surrender of the LLC interest, when the debtor
is the sole member. You need a well-drafted LLC operating agreement as
opposed to an operating agreement that is 'off-the-shelf' or a
template found online. You want an absolutely lawsuit-proof operating
agreement for your LLC for optimum protection. Few standard operating
agreements include these more protective provisions. The protection afforded
an LLC membership interest or limited partnership interest depends on
whether the operating or limited partnership agreement contains these
protective provisions. Yet they can mean the difference between keeping
or losing your ownership interest to the entity. You need a good asset
protection attorney to prepare and to periodically review these agreements.
The Presser Law Firm, P.A. can integrate an Asset Protection Plan with
your existing Entities and Estate Plan or work with you to create a new one.
Contact us today for a complimentary preliminary consultation regarding
your Asset Protection options.
The Presser Law Firm P.A.
6199 N. Federal Highway, Boca Raton FL 33487
(800) 999-9992 or e-mail