Property Entity / LLC
Let's say you have two LLCs. The first is the general property ownership entity and the second LLC is the 100% member of the first LLC. What are the pros & cons in having this setup (second LLC) as opposed to simply listing yourself (individual) as the member? Does this protect you more, if so, how?
Must be someone on the principal side (or an attorney) that can answer this questions!
Not a lawyer, but in my exp the biggest reason to do this is to get mezz loan optionality without having to restructure the org chart at a later date. Highly doubt you’ll get extra legal protections by doing it.
This is the answer. Sets up an org structure that is amenable to mezz loans because the mezz entity will pledge 100% of its ownership interests in the property-level LLC as security for the mezz loan
For my personal portfolio I just have 1 LLC per property that I am the sole member of each one as an individual. 2nd LLC won’t add any additional protection, only additional administrative work and fees. I’m not an attorney but I spoke to a few and they all gave the same advice. You might get some additional anonymity from the 2nd LLC but I just list my attorneys office as the address for each property LLC to accomplish this.
Thank you.
The second entity does cost a bit more yes, however it provides significant value when it comes time to raise equity capital. Also there are management advantages as well.
Yes, if I ever acquire something with partners there will be a 2nd LLC, but for properties where I am sole owner I don't see any need for 2 layers.
I personally use this structure
Entity ownership: LLC
Holding corp: S-Corp (registered in an annominity state)
The main reason for this is that it allows you to easily restructure the cap table, take on other investors, dilute existing investors, isolate asset ownership within the S-Corp if desired, etc.
The primary big problems with using a single layer LLC is two fold. 1) it opens you up to identification 2) it makes taking on new investors insanely complicated and costly. This doesn't even begin to account for the taxation problems that arrise when discussing LLC cap table restructuring.
What states are anonymous? Besides DE
NM and WY are. DE is basically anonymous but there are some weird quirks there that can negate that for specific types of deals.
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