One of the most asked questions I asked of me, or I see on other forums, is how to hold rental property. Should it be an LLC, S-Corp, sole proprietorship, etc. I cannot speak to all the benefits of each method, but I can speak to what I have done with my properties. You may want to consult an expert (i.e. not me) to determine what is best for yourself.
Here is the way I hold rental property, and the reasons behind it.
How to Hold Rental Property for Personal Protection
Many real estate investors hold property in various entities for personal protection reasons. Make no mistake, personal protection is important. It is also important to do the right things so you avoid needing protection in the first place. You should have enough insurance so you can cover the most anticipated issues. Have an umbrella insurance policy that protects your personal assets and your business entities as a firewall.
Hiding Assets
Setting up a business entity to avoid disclosing ownership is OK, but a sharp attorney will find your assets, or compel you to disclose them. And they can pierce the corporate veil if they really try. Or cause you to go broke defending yourself. People can find out who owns what property, and where that person(s) lives, if they really want to.
Where to Form the Business Entity
There are Delaware corporations, Nevada LLCs, South Dakota entities, Irish corporations, Virgin Island business, etc. Unless you are very large, you may find it is best just to incorporate in your own state. All mine are Minnesota entities, all are pass through entities, and none are large enough to pay any extra taxes, such as apportionment taxes, due to their size.
Naming Conventions
There is a strategy that you name your LLC after a company that exists far away. Like naming the “123 Oak Street LLC” property, to “Nevada Mortgage Corporation, LLC” instead. This may throw potential lawsuits to look out-of-state to Nevada when they are actually trying to find a Minnesota LLC. It also may cause you to forget what LLC name goes to what property when you have several properties. And if you are too slick for your own good, a jury may think so too.
All my properties are in their own LLC. Each one has a unique name, which corresponds to the address for the property. Like an LLC for a property on “123 Oak Street”, is named “123 Oak Street, LLC”. It’s non-creative, but I can remember what LLC goes to which property easily. If I buy a property that a previous investor owned and they also used this naming strategy, I may need a slightly different name. I have never had an issue with someone already using the LLC name I wanted.
Expenses with Setting Up Business Entities
Each one of my business entities had to be filed with the Minnesota Secretary of State. It costs $155.00 for my most recent organization. I needed to get a Federal EIN, and a Minnesota taxpayer ID for each one. Those tax numbers are free, but it still needs to be done.
Each property files their own income taxes and has a lengthy partnership tax form. There are annual registration filing requirements with the Minnesota secretary of State, which is free, but is a time burden that must be completed.
Each Property in an LLC
Each one of my properties is in its own LLC. I am not sure if I actually need the separate LLCs, but it is what I do. They are all multi-member LLCs, with a token allocation percentage to a non-related,non-spouse person.
I have heard that multi-member LLCs are safer in a lawsuit, as the plaintiff cannot get 100% of the LLC, I am not sure. I do know that I can potentially lose my allocation, but the other member’s allocation that is not mine would not likely be ‘lost’. It may create a dis-incentive to be sued?
Since each property is in a separate LLC, if I was to get sued and lost the suit, I could jettison that single property and move on. It would sting, but I would likely not loose the entire enterprise. A different property in a different LLC may be exempt from that lawsuit. In any case, it would have to be named separately in the court action. Hopefully this helps my asset protection.
Each LLC needs to file their own taxes, something I do myself with TurboTax. I have eight rental properties, so I need to file and mail eight returns. It keeps me busy at tax time, but it is very repetitive work, not hard work.
If you can complete a Profit and Loss Statement (P&L), you can use TurboTax. Meet with an accountant once a year, or ask a lot of questions, and you can avoid paying for any tax preparation.
A Holding Company for the LLCs
I have a pass through LLC entity, or a holding company, that conducts business for all the individual properties. To be honest, I am not 100% sure I need it, but it makes sense. 100% of the income is distributed to the individual LLCs through this ‘master’ LLC. There are no expenses to this LLC, other than “Distributions to Owners”. That expense is identical to the income it takes in. The holding company, is really more of a consolidation company. It really doesn’t hold anything, and has no assets. It helps with income and expense allocation.
The holding company distributes the various income and expenses to each property LLC using an allocation strategy based on the revenue the individual property received. That way, when I go to Home Depot, I do not have to figure out what item went to what property. The expenses are all allocated across all the properties. I only need one checking account, one credit card, and one bank account. If I had a checking account for each property, I would likely be overdrawn all the time as I would forget where I wrote check from…
The holding company does not have any accounts though. It merely receives income and expenses and passes them on. It does not retain any assets. The value of this company is $0.
The holding company also needs its own tax return.
An S-Corporation to Manage Properties
I use an S-Corp as a property manager entity. It is the only entity that has a credit card, or a bank account. It is the only name that tenants write checks out to. I can deposit all checks, from all my renters, into one account, in one transaction.
The S-Corp coordinates with contractors and purchases any supplies. The S-Corp holds the business liability insurance and any Workers Compensation insurance. The S-Corp signs all the leases.
The S-Corp leases any equipment and vehicles and puts the CEO (i.e. me) as a personal guarantor. It does pass through the income and expenses to the holding LLCs at the end of each year. It gets paid by the holding LLC to manage the properties.
The S-Corp also needs its own tax return.
Mortgages and Property Holding Names
All the mortgages for my properties are held in non-business entity names. The mortgages are in my personal name. It is easier to get a 30-year residential mortgage in your own name, than an LLC name. It is difficult, or impossible to refinance it, unless you reverse the name change. And then, the mortgage bank will expect you to keep it in your own name.
Using a commercial lender will help if you have an LLC, and want to refinance using that LLC. They will be loaning funds on the property value, not your good name and credit, so you may need more money down. Loan origination expenses will likely be higher, and the interest rate may change every few years.
Due on Sale Clause
After a LLC is set up, I transfer the property to an LLC name. I have been told that banks with call a loan due when the property ownership changes from who they loaned money original to, to an LLC. I have never experienced that, and if it does, I would pay off the mortgages. It would be painful, but could be done. Or reverse the LLC to my own name again. Or punt.
Here is what it All looks like
How do you like the above strategy? What do you do with your own investment properties? Would you go crazy having to file so many tax returns? Am I missing something I should be concerned about?
It looks like you have a good system. I’m jealous that your state’s LLC fees are so low. California’s fees are so high that it’s a deterrent to holding each property separately.
The only potential flaw I see in your setup is the holding company taking in all the cash and paying all the expenses. Having all the money flow through the holding company–meaning that all of the properties are at a “zero” bank account balance at all times–could cause a court to find that each LLC is undercapitalized. That means that someone suing just one of the LLCs would likely cause the court to pierce the veil of that one LLC and go after the holding company’s assets, too. It wouldn’t necessarily mean they could go after your personal assets, but as a practical matter, if they went after the holding company, they might be able to get a judgment that would encumber all of your properties, since the holding company “owns” them all.
I completely understand wanting the efficiency of only having one bank account, though. Your holding company set up does a good job of that.
If you wanted to form an entity structure that might shield more of your properties from a judgment, You might consider ditching the individual LLCs and the holding company, and grouping 3 or 4 properties in one LLC with its own bank account. You might end up with what, 7 different LLCs? But at least the other 6 LLCs would be safe from the blast zone if one of those LLCs got sued. You could sell a property or collect rental income from the other 6 LLCs without losing a part of the proceeds to the judgment. And you could still employ your S-Corp to manage if you want, although I’m not sure how the S-Corp might impact your liability. If it doesn’t have its own bank account, might that mean that they could pierce that veil and get at your personal assets? I’m not sure.
Or your could group 7-8 properties in one LLC to cut down on the number of bank accounts, but it would lessen the limitation of your liability because more houses would be grouped together.
As a practical matter, you may feel that it’s not worth it to switch things up. If you have good insurance and an umbrella policy, it likely won’t make a difference.
Thanks for letting us in to see the structure of your empire! Tax time for you must be super fun! 😉
Thank you for reading Amy!
My holding company is more of a consolidation company, maybe ‘holding’ company was not the proper word. It has no assets, it doesn’t own any property. It negotiates on the behalf of the individual property LLCs, with my S-Corp. So, that company really doesn’t have any cash, only a book entry at the end of the year. The only entities that actually have any significant assets are the individual LLCs, and they have the actual property.
When I set up that holding company, I had talked to an attorney that said it would make the resolutions and bookkeeping easier. Maybe it provides another layer of protection, although it really doesn’t deal with any one except my property LLCs and my S-Corp. No one but me, the IRS and my blog readers even know it’s there. My tenants only see my S-Corp, and live in the property owned by the property LLC.
Amy brought up a point that I was wondering about also. I thought an LLC has to be adequately capitalized in order for the court to view it as a valid business entity, i.e. the LLC has to have a bank account that has enough cash in it to operate the business. You said none of the individual LLCs has a bank account. Wouldn’t the court find an issue with that?
An LLC does have to be adequately capitalized, but what I wasn’t thinking about when I wrote my initial comment is that each LLC Eric owns does have some capital, in the form of equity in the property. That might be enough.
I don’t know if cash in a bank account is required in order for it to be considered adequately capitalized. It might be enough for the property to have enough equity that a judgment could be recorded against it, or that the property could be sold by the sheriff to satisfy a judgment if need be. It would probably be safer to have a separate bank account associated with the property, but if the property has equity and throws off enough cash flow to cover all of its expenses, that’s probably good enough.
If each individual LLC is capitalized well enough, then it doesn’t matter than the holding/consolidation company isn’t capitalized.
I’m still of the opinion that each LLC is a separate business and needs to maintain it’s own bank account. You can have a management company that collects the rents and pays the expenses, but at the end of the day net income should be distributed to each LLC.
But I’m not a lawyer…
Great comment, but in the world of business, not all entities have a bank account. The businesses can have funds allocated, and redistributed, but no bank account is necessary. It’s a general ledger account, not a bank account.
Thanks for sharing the structure of your empire!
I was surprised that you kept the loans in your name, but with your explanation, it makes sense. I think in the mortgages that I’ve signed so far, it does say something about change of ownership and how the bank would have to agree to it before it could be done. They may not care, or they might, I’ve never tried.
Having all these mortgages under your name, do you find it difficult to justify having such a high amount of personal mortgage?
I’m thinking of another way to do things, please let me know if that would make sense? You could chose to lower your pay, keep the money in the business and lower your tax payments and get mortgages from the LLCs or the S-Corp directly?
Awesome article, I’ve learned a lot today!
Thank you for reading!
Empire…lol It is near impossible to get a 30-year mortgage for a rental property. Looking back, a commercial loan would have been a better option, with the adjustable rate, as rates have been headed down… But at 5%, which used to be a great rate, it looked great at the time.
The mortgages are in my name, but they are attached to a rental property. They are non-owner occupied mortgages. That is, if I quit paying, the rental property would be foreclosed on. It is a high amount, but with almost $3M in real estate, having a bit less than $500K in mortgages is not bad. Very soon to be under $400K. And if I manage the properties myself, the rentals throw off well over ~$160K a year, which would take a greater than $5M portfolio to generate that income with a 3% dividend (not taking the original investment). So I consider the mortgages just a necessary evil.
If you keep your income low, you may have trouble qualifying for a mortgage. Keeping the money in the business is OK, but if you use an LLC, or an S-Corp, the profits flow back to you regardless. And you have to pay tax on that money, that year, even if you leave the money in the business. So it will be reflected in your income, that year. You cannot retain earnings in an S-corp or LLC.
If you want a 30-year mortgage, for a 4-plex or smaller, you need to have income for the bank. It can be W2 income, or from a rental property, but the rental income must be on your tax forms for 2+ years. If you want a commercial loan, you need to have equity, and if the property does not support the payments, you do not get the loan. A commercial loan starts at a 5+ unit building.
Now I understand, thanks for the detailed explanation. Looks like you’ve got the right structure.
Long time reader here. As you say, this is a very FAQ, so it is nice to read how this set up is working for you. This is one of those topics you hear and read a lot of people speculating about, but rarely giving any practical examples like yours.
Keep it up! And enjoy your retirement!
Thank you for reading!
There was a bit of thought that went into my setup, but it all seems to make sense once it is there. I see a lot of posts and articles about landlording theory, but not much in the way “how to actually do it”.
I’m in the process of reorganizing my portfolio.
You were right to point out that great attorneys will find a way to pierce the veil or make you go broke in the process, so I’ve decided to go with the holding company – operating company setup.
All my properties will be held in a holding company. The holding company contracts all management to the management company, which we operate at an arms length entirely through sub contractors. Even rent collection, evictions, everything is handled by the management company.
The idea being that anything that goes wrong will hopefully be caused by some problem with the management company and not the holding company.
Someone falls through some railings? management company was under contract to keep them fixed.
Someone falls in a hallway? Same thing – management company.
Then more specifically the sub-contractors will likely be responsible because everything is subbed to them.
I guess we’ll only see if it works when we get sued, so let’s hope we never have to test it!
Thank you for reading!
Why not have a LLC for each property to further minimize the risk? You can still have a master company, like I do, that can be used to conduct business for all the LLCs.
A few reasons. First, in the state I operate in, an LLC has a $500/year fee. So, it adds up fast.
Second, in order to protect the veil each LLC requires it’s own set of books, bank account, etc… It’s a lot to maintain.
Thank you for reading!
You are 100% correct, there are many things to consider when forming business entities.
There is no annual fee in MN. You could actually form your LLCs here in MN, (or NV, or DE, etc.) Each LLC requires a tax form, but the set of books can be reduced by having a holding company or intermediary company as I do. Each LLC has a single GL entry for all income and expenses, once a year. The amounts are allocated annually by the intermediary LLC. My S-Corp and management company have the day-to-day entries.
Other than the property asset, there are no cash balances, so I do not need a bank account. In an LLC, all profits and losses flow through to the members at year end, at the same time I allocate my income and expenses.
For me, it’s not much different than having one company.
Eric,
I have always enjoyed reading your blog and it has been truly motivational for me. I am closing on my 5th rental house this week and now seriously thinking about forming the LLCs. Currently all properties are under my name and lease from me to tenants. I was thinking along the same line as to forming a holding company LLC and then two LLCs underneath it for group of two and three properties in each but I am still not sure how the holding company will work. May be you can help clarify few points for me.
– Do you make a lease from holding company to tenant or from individual LLC to tenant? I dont want S-corp as a property management, but may be I am wrong.
– Will the tenants deposit their rents into holding company checking account or their property LLC?
– Do you do schedule E for each individual LLC? or all LLC income flow into your schedule E?
Thanks,
-Al.
Thank you for reading Al!
My S-Corp does all the leases between the tenant and myself. I sign them as president of the S-Corp. It could just as easily be an LLC. There are a few benefits of being an S-Corp, rather than an LLC, I think…
The tenant makes their checks out to the S-Corp. I never require a tenant to go to the bank, that is something I would hate to do myself. Autopay, or a rent box in the building is how I get most rents. Also PayPal.
I receive a K1 from each company. I do a schedule E, as TurboTax puts on in, but it has the total amounts from my individual K1s on each LLC. It lists each LLC on a separate line.
Feel free to ask any addition questions. If you ever want to discuss over the phone, send me a email from the contact me page.
Eric,
Thank you for your detailed answer. Just closed on my 5th property this week and filed for LLC. My wife and I are on our LLC. I am still not very clear on structure, so I have not obtained EIN yet. With my LLC being multi member, it will be treated as partnership ( I’m in Georgia that is not a community property state) so I think I will have to use form 8825 to report all rental income and expenses. After that prepare K-1 (form 1065) for wife and I and then flow it through our MFJ 1040. I was doing all my taxes myself until now but I am not sure what will I do next year. I see that you are doing yours using Turbo tax. I also noticed that your LLCs are multi member as well. Am I correct on my logic of starting with form 8825 then into K- 1 (1065) and from there to 1040 MFJ?
Thanks.
I use TurboTax, and it’s all magic from here… That does sound correct.
This turned out to be pretty timely… I have recently restructured my couple of properties and have a similar post scheduled for tomorrow morning. However, reading yours is much more impressive. You definitely know your stuff! 🙂
Hopefully as I continue to grow my portfolio, I can follow your lead on structuring to give myself the proper asset protection as well.
— Jim
Thank you for reading Jim!
I look forward to your post. It’s all a learning process, even for me. Hopefully in the end, I can look back and say it was all worthwhile.
This is quite interesting. I’m hoping to buy my first rental in two years after I get some down payment money. I was planning on operating a holding company that owns the properties and then a management company that operates the day to day operations.
Florida has recurring fees for nearly everything (hooray for having no income tax!), so it wouldn’t make sense to set up that many LLC’s as a shield. Likely better to rely on insurance and arms length transaction.
Thank you for reading!
You can incorporate in MN. Of course, that means MN income taxes…
What’s the point of living in a no-income tax state just to burden my assets (which I also seek to turn into my retirement gems) in an income tax state?
As an aside, I read a LOT of your articles yesterday – especially your maintenance ones. I’m trying to be a DIY’er and completely redo our guest bathroom, so I appreciate having that resource there.
You cannot get away from taxes. The government gets you one way of another…
I will be putting up more DYI articles as time allows. There are always small fixes I do, and some great time savers for rental property maintenance.
The whole LLC thing has been pestering at my since my very first property. I tend to worry about the due on sale clause and the stress of doing the taxes with it which has been holding me back. Thanks for sharing how you set yours up. I really need to get off my lazy behind and get this taken care of once and for all!!
Thank you for reading!
I like the concept of an LLC for protection. The due on sale clause in a residential mortgage is always a concern. At this point, I have a lot of equity in the buildings, and always make my payments, so I doubt that there would be an issue. A commercial loan, prefers an LLC set up. Worse case, I either pay them off, or bundle them in a commercial loan.
Good luck with your set up.
Rental property always a rental home. You can’t enjoy your life as much as in your own home. Very detail article.
I would love to obtain a copy of the written agreement you have between your holding and management LLC’s! It may not pertain exactly to what I’m looking for but it would be a great place to start the verbiage for our own re-organization.
As a side note, we have quit-claimed several property deeds with active mortgages and we have never been victims of the lender calling the loan due. However, as you suggested – if this happened we could easily transfer the properties back.
It seems like you’ve put a lot of thought into maximizing your real estate holdings. This blog is a definite must visit for people interested in real estate and rental income streams. Thanks for all of your work.
Thank you for reading!
I am glad I could help.
Thanks so much for sharing.
According to this discussion, they mention that each property should have it’s on LLC like you mention, but they also mention that you should file taxes for each of them as they are considered “disregarded entities” by the IRS. Your thoughts?
https://www.nerdwallet.com/ask/question/what-is-the-best-legal-structure-for-holding-rental-real-estate-154
Also, what do you know about serial LLCs?
Thanks
Guy
I meant that you shouldn’t file taxes for each. And apparently it’s called series, not serial…
Thank you for reading!
I do file a separate tax form for each LLC. I do not know anything about serial LLCs.
I think I’m missing something here. I understand the purpose of a “master” entity that owns and conducts business on behalf of the individual property LLCs. But why is there an S-Corp AND a holding LLC? I didn’t understand after reading why both were necessary.
Sincerely,
ARB–Angry Retail Banker
Thank you for reading!
The S-Corp can hire people more easily as I understand. Especially family members. It can distribute dividends too. It was an entity I had already set up many years before I had rental property, so I use it. There are some advantages that an S-Corp has that an LLC doesn’t.
The master company just works with the S-Corp to make income and expenses easier to distribute.
Thanks for your many interesting articles. I really enjoy your blog.
Regarding the system you’ve created, I feel the need to comment. This system seems unnecessarily cumbersome. You’ve created a substantial burden of paperwork and cost in entity registrations/renewals, the tracking of income and expenses, and preparation of tax returns. Why? To shield yourself and/or your personal assets from liability? That strategy likely won’t work, not because of a high risk of ‘piercing the corporate veil,’ but because your personal involvement in repair and maintenance issues will give rise to liability claims against you as an individual. A claim is most likely to exceed the coverage amount of a basic liability policy when someone is injured on your property. Injuries are most often due to poorly maintained properties or hazardous conditions. I am an injury lawyer. Standard practice in my field is to file suit against the LLC AND against the individuals who own the LLC in premises liability litigation. Claims against individual owners will hold up if those individuals actively handle their own maintenance or actively manage their own property. Those claims hold up because it’s the negligence of the individuals which caused or contributed to the injury. The mere fact that a property is owned by an LLC doesn’t prevent me as a lawyer from asserting independent negligence claims against one or more individuals. If you are a named defendant (as you would be if a competent lawyer is handling the plaintiff’s claim) then you cant just ‘jettison one property and be done’ because the value of your other holdings (including the value of your majority ownership interest in the remaining LLCs) are still at risk with individual liability.
I also handle a fair amount of bankruptcy work, and I have had many small business owner clients who waste thousands of dollars yearly in accounting fees to maintain multiple business entities that serve no real legal purpose. Good for you that you handle your own tax returns – you’re wasting time but not too much money. Readers who would hire an accountant for tax return preparation should think long and hard before creating multiple legal entities because the costs can be substantial.
I follow a much simpler approach with my rental units. I currently have 23. All are in my name, and all insurance policies are in my name. I pay extra ($300/yr) for an umbrella policy. Knowing that i would be named as a defendant if a claim is made, I consider an umbrella policy to be a much better form of protection than multiple LLCs. I minimize the chance of claims by responding to repair issues quickly, hiring out professionals when really necessary, and taking lots of pictures whenever I have a turn (in order to document the condition of my properties). I sleep well at night, without a single LLC.
I realize that the formation of LLCs is widely encouraged, but in my analysis LLCs often fail to achieve their purpose, and instead merely add cost and complexity. In my assessment you have less legal protection than you think. The LLCs do no harm, but don’t skimp on excess coverage in reliance on LLC protection.
Thanks again for your many interesting and informative articles. I’ve read nearly every one. Please keep up the good work.
Thank you for reading!
You are right, the LLC’s may not offer the protection that is necessary. It may make things a bit more complex, so that an opposing lawyer may think twice about taking a pro-bono case. Or not.
In the end, being a landlord is a risky business.
Besides being unnecessarily complex and in some states expensive, there are too many flaws in this setup, some of which John pointed out. One other flaw I can think of are the fact that your mortgages start out in your name, so your ownership of the property is public record even if you later change it to an LLC. A lawyer or PI could find everything you’ve ever owned through a title history search. If you really wanted to make it difficult for properties to be found, they must be owned by a trust, of which you are the beneficiary (not the trustee), and to complete the circle they must be purchased by that trust to begin with, so there’s no public record with your name. Of course a trust probably won’t be able to get a mortgage, so you can only do this if you already have the money. Trust documents are not public and require a court order to reveal, but nobody knows of which trusts you are a beneficiary, so it’s very difficult or even impossible to attach them to a lawsuit. If you can’t do this, you can skip all of this LLC nonsense and just get a sufficient umbrella policy.
Thank you for reading!
Great points. Knowing what a person owns is only one piece. Protecting from liability is another. With each property owned separately, it may be much more expensive for someone to sue.
Worse case, you can cut one property loose and keep the rest.
You are assigning a lot of value to your LLC structure, but I think it has no value at all. I don’t know where you got the idea of just cutting one property loose, I’m pretty sure you won’t get off so easily. As John pointed out just above (the January 5, 2017 comment), if you are personally liable in a negligence case, the opposing counsel will have no problem not only finding everything you own (because it’s all public record), but also attaching it as your asset to determine how much you are worth and how much they can extract from you. Being multi-member LLCs may make it only slightly more difficult to attach, but if they manage to figure out that the 2nd member is just a token owner, it probably won’t save you.
Anyway, I think you really need to consult a few attorneys intimately familiar with this subject to see if there’s any real value in doing what you do, then write an update post about your findings. As it stands now, a bunch of amateur landlords may be reading this and trying to take advantage of this strategy, and wasting time and money for years without any real benefit.
What part of Limited Liability Company (LLC) do you fail to comprehend? While nothing will protect a landlord 100%, not even an umbrella policy, an LLC was designed specifically to do just that. Hence the name. It is not to hide, but to limit liability. If I wanted to hide, I would have meaningless names and structures owned by other structures.
I did talk to an attorney to get advice on how to set up my structure(s). That is what he recommended. I talked to an accountant that recommended a structure different than just a Schedule E or C, he recommended a separate business. A business is less likely to get audited than schedule C, and has better tax advantages. Most Real Estate investors do a similar structure when they set up a separate business entity.
Are you an insurance agent that recommends only insurance? You have a lot of ideas on what is wrong, but no suggestions of your own how to do it in what you think is the ‘correct way”…
You fail to comprehend that the “liability” is only “limited” if the veil can’t be pierced. Your LLCs are basically a sham — they’re pass-through entities that don’t do anything. If I understand your article correctly, they don’t even have separate bank accounts. Since all the business is conducted by the single Hodling Company, that’s the only legitimate LLC you have. Unfortunately for you, it owns the rest of the LLCs, so really your liability is limited by everything that the Holding Company holds (which is everything you own), not by each unit LLC individually.
If each of your LLCs conducted business separately from the rest, had separate bank accounts, collected their own rent and paid for their own expenses, then distributed profit to the owners, then they might actually provide the limited liability they’re supposed to.
I’m not selling insurance. I’ve been reading about these structures for a very long time. No structure is good enough until tested and proven in court. This is why I recommend you to have adequate insurance and either get rid of this nonsense structure or check with a few more attorneys that are intimately familiar with this subject. Not every attorney will know it all, not even if they specialize in real estate.
I agree on the insurance. I have a business liability, a business umbrella, and a personal umbrella policy. Any landlord, or any person, that does not have adequate insurance is a fool.
I do think a LLC helps just a bit more too.