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Arizona
Law
Arizona
LLC Library
Investment
Real EstateWhy Most Arizona Investment Real Estate Should be Held in an Arizona Limited Liability Company
Two Primary Asset Protection Rules for Real Estate Investment
by Richard Keyt, Arizona business & real estate attorney
If you own Arizona investment real estate in your name, rather than through an entity such as an limited liability company, corporation or limited partnership, all of your assets and life savings are at risk and could be lost to a creditor if a problem occurs with the property. Because the LLC is the entity of choice today for holding title to real estate, the corporation and the limited partnership are infrequently used in Arizona to hold title to real estate.
Owning real estate for investment, especially residential and commercial real estate is inherently risky. Accidents happen. People can get hurt on the property. When people are injured or killed on property that does not belong to them, the injured victims and family members of deceased victims frequently sue the property owner for damages.
Insurance is the first line of defense to protect against claims arising from the property, but judgments can exceed the amount of insurance coverage and sometimes insurance coverage is denied. For example, if you have a $2,000,000 general liability policy and an injured tenant obtains a judgment against you for $3,000,000, you have a $1,000,000 problem that could have been avoided if your property were owned by an LLC rather than by you in your name.
When your Arizona LLC holds title to real estate and the worst case scenario occurs and the court awards the multi-million dollar judgment in favor of the plaintiff, the defendant will be the LLC instead of you and the creditor should only be able to collect the judgment from the LLC's assets. Your assets should be protected. You may lose your entire investment in the property owned by the LLC, but the rest of your assets should be safe. The cost to form an Arizona limited liability company to hold title to your real estate is insignificant compared to the money and time most people invest in their real estate.
Two Primary Asset Protection Rules for Real Estate Investment
Asset Protection Rule Number 1. Buy as much insurance as you can afford to insure all of your LLC's real estate and business activity. Make sure you have written proof of insurance showing that the LLC is a named insured. If you transfer real property to your LLC, but do not obtain insurance naming the LLC as an insured, the insurance company will probably deny coverage.
Asset Protection Rule Number 2. Form an LLC to hold title to your real estate so that if a lawsuit occurs, the LLC will be the defendant rather than you. This is the key to real estate asset protection. If you own the real estate, all of your assets are at risk. You must transfer title to the real estate to your LLC to reduce the risk you will be named as a defendant in litigation arising from the real estate.
Corollary to Asset Protection Rule Number 2. You have to actually sign a deed conveying the real estate to the limited liability company and record the deed in the county in which the real property is located. It is a waste of time and money to form an LLC to hold title and never deed the property to the company because you continue to own it and will be the defendant in a lawsuit.
Caveat Number 1. Even if you form an LLC and transfer the real property to the LLC, you will remain liable for your conduct. For example, if your LLC owns a rental home, you install a new water heater in the home, the water heater blows up and a tenant is killed or injured, you will be sued because you are the person who caused the harm by improperly installing the water heater.
Caveat Number 2. To avoid being sued after you form your LLC (see Caveat Number 1 above) eliminate or minimize action with respect to the LLC and its property that creates a risk that you will be sued. You have less risk of being sued when the water heater needs replacing if you hire a good plumbing company to do the job instead of doing it yourself.
For information on a related topic, see my article entitled "How Many LLCs Should I Form for My Properties?"
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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