Which Entity is Best to Protect Your U.S. Real Estate?
This involves four parts to determine which is the best entity to protect these powerful assets. Those include:
Do You Protect Assets the Same?
Absolutely NOT! You first have to understand the difference between what are called “safe” and “riskassets.”
A “safe asset” is one that does NOT directly cause liability. An example of a “safe asset” would include investments, art and cash. If you own a “safe asset” in an LLC, there are no public customers. There is no reason why someone would sue the LLC directly because it is not doing business with the public.
A “risk asset” is one that DOES cause direct liability. An example of a “risk asset” would include an operating business, real estate and equipment. If you have an operating business you have clients, vendors, perhaps employees, all which are a potential source of great liability. If the LLC owns real estate, that may involve several legal issues down the road even if you flip the real estate after you fix it up . The key is to have a separate legal structure (and maybe more than one) to protect your real estate separate from the “safe asset” business (if you have one).