Real estate is a thriving industry right now, with people turning dreams into reality as property values skyrocket and the market continues to move throughout Florida. The thriving market has some less experienced individuals getting involved and building up impressive portfolios relatively quickly. With inexperience, however, comes greater risk when investors don’t consider the best ways to structure their real estate business. Whether you’re inexperienced or have been in the industry for a long time, Bryant Taylor Law can help you protect those investments.
We recently touched on the risks of holding your portfolio in your own name, and one of the best solutions to alleviate those risks is to set up one or multiple Limited Liability Corporations (LLCs) to protect and manage your real estate assets.
Ultimately, you need structure when growing a business, but you also need to make sure that structure follows Florida laws. Holding one LLC for all your properties is better than simply holding all properties under your own name, but the best option could be forming an LLC for each property to contain risk and management individually.
Limiting liability
They’re called “Limited Liability Companies” for a reason. These are the most common form of business structure today because they are cheaper and more reasonable to set up for an individual who is managing multiple assets. The liability exposure to you and your other business dealings is limited by forming this type of corporation.
As we mentioned in the blog linked above, if you face a lawsuit or liability due to an incident at one of your properties, any other assets owned under the same name or LLC as that property will be exposed. If you hold three properties in an LLC and there’s an issue at one of them, all three can be exposed to risk. If you hold one property in an LLC and other properties in separate LLCs, only the one property held by the LLC will be exposed to liability.
Controlled costs
It’s worth noting the process to file multiple LLCs will be far more upfront than holding the properties in your own name or forming one LLC. This can turn away some investors, but it’s important to look at the long-term costs, as well.
The cost of establishing multiple LLCs is likely to be far less than the cost would be if you face a lawsuit without limiting your liability. The investment you make today in forming LLCs will protect the investments you’re making long-term.
Florida fees for forming LLCs are relatively straightforward. You will pay $125 in filing fees and then face additional annual and maintenance fees over time. You can learn more about the specific fees on the Florida Department of State website.
Business succession
We briefly touched on this in our previous blog, but one of the biggest benefits of setting up different LLCs for different properties will be the control you have over what happens to those properties after your death. You may not be able to simply pass properties to heirs and beneficiaries if they’re all owned in your own name.
When you have properties held under different LLCs, you can designate specific beneficiaries to those entities in your estate plan. In this case, the courts won’t be able to prevent you from passing those properties as desired because they’re considered separate entities and not just held under your estate.
At Bryant Taylor Law, we understand the importance of protecting your assets. We work with real estate investors every day who want to secure their investments and plan for the day they need a business succession plan. If you need help navigating Florida laws to form your real estate LLCs or to set up a plan for the future, contact our legal team.
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