Protecting Real Estate with Series LLCs
Lawyers in DuPage County Helping Real Estate Investors
Sean and Robertson Legal Group, LLC are experienced in the areas of asset protection and series LLCs for real estate investors. Series LLCs can be a critical component of asset protection, and real estate investors often overlook the advantages of coupling these tools with other estate planning instruments such as living trusts and irrevocable trusts.
In many cases, real estate investors are concerned with growing their real estate portfolio and fail to adequately invest in their asset protection legal needs. Asset protection is critical because one lawsuit can derail a lifetime of disciplined and sacrificed real estate investing. Today, lawsuits are rampant and pose significant liability threats to real estate investors.
What Is a Series LLC?
Illinois is just one of about 10 states that recognize series LLCs. A series LLC is a business entity where a real estate investor pays more for the first LLC or adds onto an existing LLC. According to the Illinois Secretary of State, Illinois is among only a few states that permits the organization type of a limited liability company “series” or “cells” that have their own interests, liabilities, and members. The filing form for a “series” LLC in Illinois is LLC-5.5(S).
The series LLC serves several purposes. The first problem a series LLC solves is the cost factor. Corporate and real estate attorneys usual recommend that each real estate property have its’ own limited liability company (“LLC”). Previously, each property having its’ own LLC was costly because LLCs in the state of Illinois cost a minimum of $500. Furthermore, each LLC required its’ own annual report. The cost associated with maintaining an LLC per property was prohibitive and the requirement of an annual report per LLC property was significant. The “series” LLCs enables a real estate investor to purchase an LLC part of the “series” for $50 per LLC. Furthermore, the “series” LLC only has one annual report due for the entire series.
One of the benefits of “series” LLCs is the ability to segregate risks of multiple property ownership. For example, assume John Smith is a real estate investor who owns four real estate investments throughout the Suburban Chicago area. Unfortunately, many real estate investors own their real estate investments in their own name or together with their spouse. This causes significant concern because one lawsuit or judgment could jeopardize a couple’s entire real estate portfolio. A judgment against John Smith’s name will automatically attach to any real estate properties that are held in his name. This is a major problem because John Smith cannot sell his real estate investments without paying off the lien or judgment that has attached. Moreover, this causes another issue: the lack of flexibility.
During the Great Recession, real estate investors strategically defaulted on their properties. If you own multiple properties in your name, this limits your flexibility because one foreclosure lawsuit or judgment cause threaten your entire real estate portfolio. During the Great Recession, I met a real estate investor and landlord who had upwards of 20 rental properties. Unfortunately, two of the real estate properties were upside down and caused him to lose his entire real estate portfolio. The series LLC is designed to counter this problem and segregate liabilities associated with one property to just that property.
Asset Protection and Estate Planning
Another major problem is a lack of estate planning for families. One will often see a landlord or real estate investor that owns multiple real estate investments without an estate plan in place. Many of the real estate properties will have significant equity, and the husband and wife will fail to follow through on their estate and asset protection goals.
At our firm, we know how to develop combined strategies that combine asset protection, land trust planning, series LLCs, and estate planning to benefit investors and their families. We provide value-oriented legal services, and we are ready to become a life-long partner who will assist you in protecting your hard-earned assets and real estate investments.
Contact an Experienced Real Estate and Estate Planning Attorney
Unlike many other real estate law attorneys, Robertson Legal Group, LLC is also experienced in the areas of long-term asset protection and estate planning. Conversely, we have knowledge and experience in real estate law that other estate planning lawyers do not. Let our team assist you with your real estate issues and concerns. Contact our office by calling 630-780-1034 for a free consultation today.