Posted by John Merchant on July 25, 2007 at 10:47:01:
Occasionally an LLC is penetrated, but generally this is not the case and holding a rental inside an LLC is good legal protection.
If you’re careful about not commingling LLC funds with your own, and document everything you do on a property owned by an LLC and you really honor the LLC’s real existence, then that LLC IS a legal shield and the courts in all states are loathe to let any creditor penetrate it.
I see no huge problem on your owning the LLC and “employing” you to manage the rentals for “your employer co.”.
Mr. Landlord, Jeffrey Taylor says he does this with lots of his properties, and he carries a business card that spells out that an LLC is the contracted property manager company.
His name is on the card only as something like “Jr. Assistant Rental Manager” so it looks like he’s just a flunky. And if somebody asks him something about the property, or fixing something, etc., he tells them he’s just a flunky and will have to pass it on to his boss.
Also and most important, if any creditor or potential lawsuit filer/claimant is looking to sue the property owner and checking out its owner to see if he/she/it is worth suing they’ll not find YOUR name.
A lawyer who’s looking to see if the owner is worth suing also won’t be super encouraged if/when he finds it’s owned by an LLC as that’s often a tipoff that he’d have a real battle on his hands to try to penetrate the LLC.
That enemy lawyer wouldn’t even be able to dig into the LLC’s assets until AFTER he got a Judgment against the LLC and he wouldn’t have the right to do that discovery pre-judgment.
On my rentals I also carry liability ins. so if anybody does sue me or make threatening noises I turn the deal over to the ins. co. so that gives me double protection. LLC & liab. ins. is hard combo to beat in my book.