ASK AN ATTORNEY Keeping up with rental industry laws is always a challenge, so we’ve rounded up questions from AAOA members and found expert attorneys to answer them. Wouldn’t adequate liability insurance be less expensive and cover you as well as a separate LLC on each property? When it comes to your insurance and asset protection, there are important considerations you must know.
of course, running a business. A proper legal structure for any business needs to be put in place. A properly structured Limited Liability Company guards you from both an inside and an outside liability. An inside liability is anything that occurs at the property. The LLC prevents the liability from breaking away from the property to your other assets. The LLC also guards your property from outside liabilities. If you have a liability, such as a car accident, for example, and you are getting attacked, then the LLC helps protect the property from your creditor. If you are going to be in the business of owning rental income property, be sure to put the proper legal structure in place to protect your hard-earned investment. Harry Barth Esq. Senior Managing Partner Barth Calderon LLP email@example.com (714) 704-4828
Insurance is your “first line of defense” against a liability. Ideally, you can drive a claim to your insurance and avoid having your personal assets attacked. However, insurance is not the “end-all-be-all” solution. What if the amount of the judgment is more than the amount of your insurance coverage? There is zero correlation between the amount of insurance and the amount of money someone sues you for. Also, have you read your insurance policy lately? There may be covenants and exclusions for certain types of liability when you would not be covered. And no insurance policy covers punitive damages. Proper asset protection involves the integration of your insurance with the appropriate legal structure. When you own rental income property, you are,
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