IF YOU OWN THE PROPERTY IN AN LLC, THEN THE LIABILITY IS CONTAINED TO THE PROPERTY AND CANNOT BREAK OUT TO IMPACT ALL YOUR OTHER ASSETS.
then it won’t matter that you have a bad LLC. It’s WHEN that liability comes that you will need your LLC to work. It’s like earthquake insurance on your home. If the big one never happens, then who cares if your insurance is horrible. It was never needed. But when the house starts to rattle, you hope you have good insurance and that it will be there for you. So, what are the important areas involved in a proper LLC? For sure you need to choose the proper jurisdiction for your LLC. Every state has different rules on how they handle LLCs. Some states, like California, are what’s known as foreclosure states, meaning that foreclosure is a remedy the state allows when someone is coming after you. Other states, like Nevada, don’t allow foreclosure as an option. And just because your property is in California does not mean you cannot set up a Nevada LLC registered to do business in California. There’s also the importance of your operating agreement. I recommend that you always put one in place and that it has asset protection provisions built into it. Because if you get attacked, the person coming after you (and the attorney) will most likely tear your operating agreement apart looking for mistakes they can exploit. If you don’t have an operating agreement in place, then watch out! In many cases you default to the off-the-shelf agreement the state has and that’s not the best way to go. That agreement was not tailored for you and your particular property. You also have to treat your LLC and property as a business when it comes to maintenance. You should not co-mingle funds from the property with your personal funds. For example, you should not be buying groceries from your business account. This opens you up to scrutiny by the person attacking you. There’s also the important issue of single-member LLCs vs multi-member LLCs. Which is right for you? That depends on your particular circumstances. In many cases, I recommend
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