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Arizona
Law
Arizona
LLC Library
How Many LLCsHow Many LLCs Should I Form for My Properties?
Single vs. Multiple LLCs
by Richard Keyt, Arizona business & real estate attorney
One of the most common questions real estate investors ask me is "if I own multiple investment properties, should I put all the properties in one LLC or should I put each property in a separate LLC?"
The answer to the question is that usually, every investment property should be owned by a separate limited liability company that owns only one property and that is not engaged in any other business activity. The reason is simple: to maximize asset protection.
Consider the fairy tale of the three little pigs. The three little piggies each owned three rental properties. The first pig owned his properties in his name. The second pig owned all three properties in a single LLC. The third pig formed three LLCs and each property was owned by a separate LLC. By sheer coincidence, the water heater in one of the properties owned by each pig blew up and killed a tenant.
The first pig got sued by the family of the deceased and lost all of his life savings when the judgment exceeded the insurance coverage. The second pig lost all of his equity in his three properties, but his other personal assets were protected. The third pig lost only his equity in the property owned by the one LLC and his personal assets and the equity in the other two properties were protected.
Asset Protection Rule Number 2 (for Asset Protection Rule 1 see Two Primary Asset Protection Rules for Real Estate Investment): Hold title to investment real estate through a limited liability company. Most real estate investors known that the reason to form an LLC and to transfer investment real estate to the LLC is to reduce or eliminate the risk that the investor may lose his or her life savings because of a disaster with the property. If the water heater blows up at the rental property and you hold title in your name, you may be sued and a judgment that exceeds your insurance coverage could take your life savings. If your LLC owns the property, it will be the defendant in the lawsuit and you should not be liable personally unless you were the reason the water heater blew up.
Asset Protection Rule Number 3: Diversify your assets. The old adage "do not put all of your eggs in one basket" applies to real estate investment just like it does to any type of investment. If you satisfy Asset Protection Rule Number 2 and create a single LLC to hold title to your three investment properties and a disaster occurs on one of the properties, the creditor could reach all of the equity in all the assets owned by that limited liability company, i.e., all three properties.
Do Not Be Pennywise & Pound Foolish. If you buy three properties today for no money down, you will not lose much if you lose all three properties in the near future (but you might in the future when the properties appreciate in value). However, if you have $50,000 of equity in each property, you risk losing $100,000 that could easily be protected by having a separate LLC own each property. By saving the relatively small amount I charge to form additional LLCs you risk losing all of your equity in each property held by the same LLC. The more properties your single LLC owns, the greater the risk that there could be a problem with one of the properties that could result in a lawsuit.
Consider the one time cost to form an LLC as an alternate form of insurance that you should not go without. The cost to form an LLC is peanuts compared to the amount you may invest in property coupled with the property's appreciation in value over time.
How to Hire KEYTLaw to Form Your Arizona LLC
If you value your time, want to protect your personal assets from creditors and would like an Arizona LLC attorney who has formed Arizona entities since 1980 to form your new limited liability company and give you a copy of the Arizona LLC Quick Start Guide for $599 ($549 for AZREIA members) including all costs and fees, let Richard Keyt form your company.
The quickest way to hire Rick to form your new Arizona LLC is to click on the following link to access our short online LLC formation questionnaire in Adobe .pdf format.
Arizona LLC Formation Questionnaire
The first step in forming your new company is to fill out the questionnaire online using your computer browser or print it and complete it with a pen. Next, email, fax mail or deliver the signed questionnaire and your check to the address shown on page 2 of the questionnaire.
If you cannot open the questionnaire, it's probably because: (1)
your computer does not have Adobe Reader, or (2) you have an old version of
Adobe Reader. Try downloading the latest version of Reader at
http://www.adobe.com/products/acrobat/readstep2.html. After installing the
latest version of Reader, go back to the
Arizona LLC Formation Questionnaire then click on the Refresh command at the
top of your browser to try to reload the questionnaire.
If you still cannot access the questionnaire or if you have questions about the
questionnaire or about forming and operating an Arizona LLC, contact Richard Keyt at 602-906-4953,
extension 101 or by email at
rickkeyt@keytlaw.com. We do not
charge for entity formation related questions. We can fax or mail the
questionnaire to you.
About the Author
Richard Keyt, J.D., LL.M. (income taxation New York University Law School) is a business, real estate, transactions, contracts and estate planning attorney licensed to practice law in Arizona. He has formed over 2,000+ Arizona limited liability companies in the last few years because his low cost high quality LLC package is second to none and it only costs $599 for everything. Rick has practiced law in Arizona since 1980. Rick can be reached by telephone at 602-906-4953, ext. 101. Email at rickkeyt@keytlaw.com and fax at 602-297-6890. Rick's web site located at www.keytlaw.com had over 3,000,000 visitors in 2006 - 2008. Follow Rick on Twitter at www.twitter.com/azestateplanner. Rick does not accept matters involving landlord / tenant disputes or litigation of any kind (other than tax lien foreclosures). Communicating with Richard Keyt via email or otherwise does not cause you to become a client or cause your communications to be confidential or subject to the attorney client privilege.
KEYTLaw LLC Formation Records: day: 17 (6/4/08); week: 27 (week ending 6/7/08); month: 64 (6/08); year: 425 (2007)
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Call 602-906-4953, ext. 1 NOW if you want an LLC to: (1) prevent creditors of your business or investment real estate from taking your personal assets, and (2) asset protect your personal assets from debts, liabilities and lawsuits.
If You Do Not Hire KEYTLaw to Form Your AZ LLC, Give Yourself Peace of Mind and Purchase Our Quick Start Guide - Only Available from KEYTLaw.com
What you don't know about operating your Arizona LLC could cost you thousands of dollars or possibly risk a court "piercing the veil" and holding the members of the LLC liable for its debts. Arizona business attorney Richard Keyt's in depth, Arizona specific 100+ page Arizona LLC Quick Start Guide is the Holy Grail about operating Arizona LLCs. Merriam-Webster's dictionary defines "Holy Grail" as "an object that is sought after for its great significance," a term that aptly describes the AZ LLC Quick Start Guide.
How to Purchase the QSG
This owner's manual for operating an Arizona LLC explains 75+ critical topics that affect Arizona LLCs. See the five page Table of Contents and you will be amazed that so many important topics are explained in one convenient source. Click here to purchase the Quick Start Guide now from our internet store for the incredibly low price of $99. Ignorance of Arizona LLC law and how to operate your Arizona LLC could be very costly.
This page was last modified on April 15, 2009.
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