How Many LLCs Do I Need?

Deanna has a bunch of rental properties and is considering a limited liability company to keep them in. Is that right?

QUESTION: Deanna owns 11 single-family rental properties and wonders if she should have them in a limited liability company. Their umbrella policy is for $1 million. Does Dave think she should do that?

ANSWER: Not bad enough that I would pay a bunch of taxes to retitle them. If I was moving anything around or was going to sell one and buy another, I might. A $1 million policy is not enough; you need about $5 million. It’s not that expensive. What you have is enough for most people, but you have quite a bit of property and exposure there.

If you have a way to retitle those properties to an LLC without paying a bunch of taxes, I might consider doing it. I would put 5 or 6 into a single LLC and move onto another one. The idea is that you don’t want too big a target on the back of anything, yourself or a company. If you get it all on one company, then it’s worth suing. But if it only has 5 in there, it’s less juicy for someone to go after by way of faking that they fell down or something.

As soon as you have some property or notoriety, there is some lawsuit-happy bozo that’s going to try and take that from you. You just have to be wise about it. Get 2 limited liability companies for this.