If you are thinking about investing in commercial real estate or residential property for rental income, you may want to consider forming a limited liability company (also known as an "LLC") first. Owning this kind of property in your personal name can expose your personal assets to legal liability in the event of a lawsuit. Forming an LLC to hold title to your investment property before you purchase will provide you a certain level of limited liability protection if properly created and maintained.
Are you buying multiple properties? We recommend forming a separate LLC for each property. Having multiple entities prevents "spillover" liability from one property to another. For instance, you invest in two properties each valued at $500,000 and take title to both in one LLC. One of your tenants slips, falls and is injured at one property location, sues and wins a judgment for $1,000,000. A lien can be put on both pieces of property because they are held in the same LLC. If a separate LLC is created to hold each piece of real estate separately, then the lien could only be attached to the one location where the injury occurred. For this reason, many banks and lenders require separate LLCs for each property so that the security interest they hold in one property is not jeopardized by any other property. If you are interested in forming an LLC, please contact Attorney Suzanne S. McKenna at (603) 527-9172 or [email protected]