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?

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Comments (14)

Sep 10, 2021 - 10:22am

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

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Sep 9, 2021 - 1:23pm

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.  

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Sep 13, 2021 - 10:00am

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.

Sep 13, 2021 - 12:33pm

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.

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Sep 13, 2021 - 9:59am

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. 

Sep 13, 2021 - 5:14pm

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