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Security of LLC Profits

Asked by: Rob - 2 August, 2012
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/default.png-f1597c1da25f30f8c1a941405e8391c8 As a Nevada resident, if I make a profit from my business, a LLC, and invest that profit in real estate under another anonymous Nevada LLC. Would my anonymous real estate LLC holding be at risk to lawsuits on my business' LLC?
Answered by: Robert Kowalski - 4 August, 2012
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/35.jpg-687fc92d5f6c5febcbdccb6895b08b8c Dear Rob,

Without getting into the legal details, which you should certainly clarify with an attorney practicing Nevada law, I can say that it would all depend on who owns what. I presume you directly own the "business" LLC, and you also directly own the "RE holding" LLC, which is turn, obviously, owns real estate assets.

If that is the case then your "business" LLC's liability is limited to its own assets, so if its sued the holding LLC is more or less off limits. If, however, your "RE holding" LLC is owned by your "business" LLC then it qualifies as an "asset" owned by the "business" LLC and can be used to satisfy judgements agains your "business" LLC. In other words, its not a good idea to own anything through the "business" LLC except the bare minimum needed for this LLC operation.

(Just FYI: anonymity plays little role here, since in case of law suits the LLC would probably be required to reveal the identity of its owners. In other words its more of a preventive measure). 

Keep in mind that its also possible to pierce the company protective veil, in which case the liability would spill down to the owners of the LLC and their assets. With that being said, Nevada is considered one of the incorporation heavens precisely because its extremely difficult to pierce the protective veil of Nevada companies.

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