Can you show concrete examples of rental real estate LLCs lacking in capital that have not provided limited liability to the LLC member(s)? Capital must be adequate for anticipated business expenses. Are major law suit damages in excess of insurance coverage expected expenses? Without some element of gross negligence on the part of the member(s) I am unaware of any instance in which an LLC has failed to provide the limited liability that the name implies.

And as to whether a separate LLC is necessary for each rental property I'm open to discussion. It is my belief that LLC's should be based on risk tolerance. So bundling more than one property into an LLC with say $500K of value may be more appropriate for some than say two separate LLC's with $250K of property in each.

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Posted by lsutigers11

Member since Aug 2005

693 posts

Posted on 8/1/13 at 8:44 am to Poodlebrain

I have been told (by lawyer friends) that LLC does not guarentee that the tenant won't/couldn't go after properties outside of LLC. Any truth to this? My plan up to this point has been Joliet to up my liability coverage through State Farm.
My case: single family home worth 150 only property

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Posted by Mr.Perfect

Louisiana

Member since Mar 2013

17444 posts

Posted on 8/1/13 at 9:01 am to Poodlebrain

I mean... no two situations, LLC's, judges, venue's, claimants are the same so I don’t really see how that helps.

If i have that 4 plex i referenced above that i have very little equity into plus a bank account with lets say 20k of your

quote:
Capital must be adequate for anticipated business expenses

and one of my tenants slips on the front step and busts their head open and is in the millions on medical bills that my llc is being sued for, what good is 300K liability and a "corporate veil" going to do? If you own a rental property there is SOMETHING wrong with it. Maybe my railing on the step was an inch low, or it was a slippery surface. The liability carrier will defend me but will likely be let out of the suit after tendering limits. do you think the plaintiff attorney is going to just walk away?

I highly doubt it. They are going to walk right through that llc and come for my personal assets.

I would sleep a HELL of a lot better buying a 1-5 million umbrella and building part of it into my rent. But that’s just me.

llc vs no llc is all about what risk you are comfortable taking.

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