In our last article we warned against going too big too soon with asset protection structures. In this article I’m going to simplify the two kinds of liability that you face as real estate investors and how to protect yourself from them.

The first liability is risk you have while running a business. This is called professional liability. The classic example is a “slip and fall” in a rental or flip project that you own. If that happens, the plaintiff will sue the “owner” of the property. If that’s you, you will get sued and all your personal assets (house, savings, cars, jewelry, etc.) can be lost in that lawsuit if the damages exceed your insurance coverage. However, if you own that property in a limited liability company (or LLC), then the LLC will get sued and your personal assets will be protected!

The second liability is a risk you have just be being alive. This is call personal liability. The best example for this is a car accident you cause while driving. Because you actually caused the damage, you are getting sued, and that means your personal assets are at risk, including your real estate holdings! However, if you have the right kind of LLC set up, you can protect your properties from that lawsuit!

So, the right kind of LLC offers two different kinds of protection from two different liabilities!

There are additional benefits to owning your properties in an LLC. It makes you look professional, running a real business. It helps bookkeeping and accounting because those transactions are all run through a business bank account. Since LLCs can have managers, it will keep the members (owners) private! This way your tenants and prying eyes won’t know that you also own the business. This can help your personal safety as well because angry tenants have been known to come after their landlords.

So, as you’re beginning to see, the Limited Liability Company is usually the first line protection when it comes to real estate assets. In the next article, we will take that a bit further! For more information, please see my website link below! I have a ton of free asset protection content.

Jeffrey S. Breglio, Esq.
Breglio Law Office and REI Mastery U
www.reimasteryu.com
jeff@bregliolaw.com
(801) 560-2180