Which entity to form, and where, for multiple real estate investments?

Asked by: David Clancy  — 18 April, 2011

We are SD residents. We own residential real estate -rental property in MT and VA, plus own a second home in AZ. All 4 rental properties are jointly owned multi family properties. Which state should the LLC be in? or multiple LLCs?

Answered by: admin  — 18 April, 2011

Dear David,

It is generally advisable you own each property under a different LLC. This way, should anything happen to one of your properties, your liability will be limited to the assets of the LLC that owns that property and your other investments will be shielded from a possible loss. In this case, each LLC should be formed in the state where the property it would own is located.

If you are reluctant to go through the administrative expense of creating and maintaining separate companies, you may want to look into a new form of business organization called Series LLC. This is basically an LLC that is allowed to have subsidiaries (called “Series”) each of which has limited liability unto itself. The problem with SLLC is that is not recognized by states where you own property, and the law of those states is not settled on how they treat SLLCs that are organized somewhere else. But that’s not to say that the setup would not work – it is just a little riskier. Under this plan, you would form an SLLC in a state which allows such entities to be formed (like Delaware or Illinois) and then register each separate series as a “foreign entity” in the state where it will own property. That way you will technically have one parent company, but your investments will each be owned by a separate subsidiary and will have limited liability from one another.

Should you need further help, do not hesitate to get in touch with us over at by either email, chat or phone.

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