Protecting Your Real Estate Investment with Series LLC

You are living in a society where filing a lawsuit has become the norm. A trial is enough to put all your possessions at risk of getting seized. It is essential for real estate investors owning multiple properties to find ways to mitigate such legal risks and keep finances in control.

Forming a series LLC (SLLC) is an excellent alternative to protect your real estate investment. Initially started in Delaware, it is spread through other states, allowing you to form an SLLC in your state and use the company across the country. Here’s how this business structure can protect your investments.

SLLC Concept

SLLC operates on the lines of the parent-child relationship, consisting of an umbrella LLC with individual LLCs under it. This business structure permits multiple series under a master LLC to work as distinct entities. Each series maintains their business names, bank accounts, and operates separately from other series in the primary LLC.

Compartmentalizes Asset Risks

The LLC series structure legally separates your capital into individual limited liability businesses within a holding company. In the case of losing a lawsuit, the damage incurred is limited to a particular asset in a single series. This structure is suitable for various assets and also safeguards investments like the stock portfolio.

Makes Your Investments Anonymous

With SLLC, your assets get separated into isolated bodies. It allows you to add an anonymous trust to each of these bodies, to ensure additional protection. Generally, information about limited liability companies is available publicly. Anyone can search for your company name and know the type of assets it holds. Conversely, a trust need not list its assets for the public. Such groups, along with SLLC, ensure all your separate holdings are invisible.

Prevents Lawsuits

Opportunity and incentive form the base of any lawsuit. The asset protection strategy of SLLC operates on these two factors.

For instance, an accident on your property can create an opportunity for a lawsuit. To initiate the proceedings, the attorney must sue you. However, with SLLC, it is not easy to file a lawsuit.

Series LLC allows you to break your company into two individual companies, one for holding assets and the other as an operating company. The operation company handles the daily operations of your business. You can prepare your contracts that make it possible to file any lawsuit only against the operating company. It acts as a shell company, protecting your investments even if you lose the lawsuit.

Moreover, anonymous trusts make your assets invisible. Even if the opponent’s legal team sues you, they cannot identify the company to fight the case. It drastically reduces the opportunities to file lawsuits against your businesses.

Flexible and Cost-effective Way to Protect Your Investments

There is no doubt that SLLC offers ways to protect your real estate investments effectively. It is flexible, pitching options to split the financial and management rights. These options adhere to the statutory directives.

The formation costs incurred for SLCC are less compared to that of traditional LLCs.

To summarize, business owners looking for isolating their assets, to ensure liability protection, will find the SLLC structure as a safe alternative.

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Author: Eddy

Eddy is the editorial columnist in Business Fundas, and oversees partner relationships. He posts articles of partners on various topics related to strategy, marketing, supply chain, technology management, social media, e-business, finance, economics and operations management. The articles posted are copyrighted under a Creative Commons unported license 4.0. To contact him, please direct your emails to editor.webposts@gmail.com.