Forming an LLC- An Intro

Posted by Yafr Qqater in Business

The biggest pro of having multiple LLCs is the enhanced liability protection. If all your business operations are in a single LLC, if one business gets sued, then the assets of all the other businesses within the LLC are exposed to that liability. Have a look at forming an LLC.

This is particularly the case with real estate. My firm has clients that are large commercial developers, and every new development is a separate LLC. Often times, each phase of the development will be a separate LLC. In addition, there will be separate LLCs for the commercial, residential, and light industrial portions in a mixed-use, planned community (e.g. new-urbanism communities).

The reason for separating your real estate into separate LLCs is so if there is a problem with one piece of property, the liabilities caused by the property don’t threaten your other assets.

We’re not talking only about the proverbial “slip and fall” case. While the prospect of someone falling and injuring themselves on your property is a common concern portrayed by the media, one of the biggest risks to owning property is environmental.

Environmental cleanup costs can often exceed the value of the particular piece of property. And you don’t have to be at fault to be liable for cleanups–if there is contamination at your property, the government will hold the owner responsible. If someone else caused the problem (such as a “midnight dumper”), then you are free to pursue them. But in the meantime, the government expects you to pay. If all your properties are owned in a single LLC, then a problem at one of them can wipe out your equity in all the rest.