Taking a Closer Look at a Limited Liability Company

Where are second homes and non-rental properties placed in my asset protection plan?

Since they are real estate, you can hurt yourself on them, and they are know as risky assets they are going into your limited liability company or your asset protection trust. This will all depend on the character of the property, the equity of the property, how you use the property, and where it is located. If its an investment or rental real estate and you have a plan it is most likely in a limited liability company.

When your property is put into a limited liability company, the limited liability company is owned by your limited partnership, the limited partnership in turn is owned by your asset protection trust, you’re protecting the equity of that property from lawsuits. I like to refer to this as outside lawsuits or external threats.

How your limited liability company can work to your advantage?

If you get sued from a car accident, employee, malpractice or anything outside of the property by having the LLC properly connected to your plan you are providing protection to that equity. It protects the rest of your assets from the property itself creating a liability. If someone has an accident, slips, falls, there is a death on the property and the owner is being sued. The owner is you in the form of the limited liability company. Not you in the form of you personally, so it limits that liability.

This is a simple explanation of the limited liability company.  The owners of the company are not left financially responsible for the liabilities of the company. This tool is very good in protecting liabilities from both directions.

Does the LLC do the same thing for boats, planes, and other risky assets?

There are a few things to consider when putting your plan together. It’s important to consider what these assets are, where they are, and make sure that they are exactly in those places that they are suppose to be. Lets say you have a rowboat or a jumbo and its a really tiny boat, not worth more than $1,500. You probably are not worried about protecting the boat. You are probably more worried about protecting yourself from the boat.

Insurance is probably your best bet if you own one small boat or one jet ski. Doesn’t make sense to create a separate LLC for just one small boat or jet ski. Although I do have some clients that have an LLC with multiple small risky assets. A good example of this is creating an LLC with three jet skis, two snowmobiles, a hand glider, parasail, and three motor homes. It makes sense to create a separate LLC for clients who have a lot of risky assets.

Do you have questions or would like more information on a limited liability company? Call us at Lodmell & Lodmell we are happy to discuss your situation or give you further information asset protection.