How best to hold 2 rental properties so as to minimize personal liabilty?
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How best to hold 2 rental properties so as to minimize personal liabilty?
I have 2 rental properties. Now I am thinking about forming a LLC to cover my personal liability if there is any lawsuit. These properties have full equity. Do I have to transfer title of my property to my LLC name? What happens if I did not do so? I heard that we should form seperated LLC for each property to provide more protection. However, I also heard that there is a way to set up 2 properties under 1 LLC but still not mingle in liability. Can you explain the concept?
Asked on October 27, 2012 under Real Estate Law, California
Answers:
FreeAdvice Contributing Attorney / FreeAdvice Contributing Attorney
Answered 12 years ago | Contributor
If you have two rental properties and wish to safeguard your personal interests from liability you should do the following:
1. have adequate liability insurance for the properties;
2. create an entity such as a limited liability company (LLC) or a corporation and transfer title of the properties into such.
3. consult with a real estate business attorney to assist you with the above.
As to not commingling matters, you need to keep your personal finances separate and apart from the entities that you may create, have bi-yearly meetings regarding the entities and have good notes and paper trails as to the business of the two rentals and keep such separate from your personal life.
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