3 Key Bookkeeping Requirements For Your Series LLC

Don't turn back if you own a traditional LLC--the information about LLC bookkeeping below applies to both the traditional and series LLCs.

The series LLC is a powerful tool for real estate investors. It helps spread your assets across multiple legal entities, which protects your assets during a lawsuit.

Remember that old saying, "never put all your eggs in one basket"? A series LLC is the best way to spread your "eggs". 

As great as this structure is, it's no substitute for sloppy bookkeeping. If you as a business owner fail to abide by State requirements regarding their LLC essentially violate their agreement with that State. This leave you vulnerable to lawsuits.

LLC bookkeeping can be complex since the rules and regulations vary between States. We strongly recommend hiring a seasoned professional to help in this area. Today we’ll cover three of the most common mistakes business owners make with Series LLCs.

Mistake #1: Failing to Maintain Separation

A series LLC is multiple, individual LLCs. Each LLC within the series is distinct and needs to maintain its own records. Once you know how to start an LLC, you know that a series isn't that much more complicated (and often brings you added protections).

The purpose of the series structure is to make it easier to manage multiple businesses. It streamlines the management process. However, you should not try to combine  the different accounting records of your LLCs. Doing so can invalidate the series structure, leaving you unprotected, among other things.

Mistake #2: Not Naming a Registered Agent

Most states require your company to name an LLC registered agent, which is a physical address within the state. If this is one of the requirements in the state you filed your business, then foregoing that responsibility will invalidate your LLC and leave you unprotected.

Mistake #3: Being Unlicensed To Manage a Series LLC

Some states require you to have a special license in order to manage properties held by another entity or to run a property management company. Violating that specific state’s laws can put your series LLC in jeopardy and result in a costly lawsuit.

That's it for the requirements. But If you're interested in learning more about how to protect yourself and your assets from lawsuits, check out this article on the power of the series LLC with Anonymous Trusts.

Why Real Estate Investors Can't Afford To Rely On Insurance For Asset Protection

If you're a real estate investor, it's time to ask yourself an important question: are you protected?
Before I began specializing in asset protection I would play for the other side. Meaning, I would sue people. Take it from me, it's easy for an attorney to sue you if you don't have a proper asset protection strategy in place. There are many ways to protect yourself, such as with a Series LLC, or a self directed IRA LLC.

Insurance Won't Always Protect You From Claims on Your Property

An insurance claim usually results from a "slip and fall" on a property or something else you would normally characterize as an accident. Typically this is what your insurance is willing to cover. But your insurance doesn't cover you from any intentional acts that might occur.
What's considered an intentional act? Well, that's depends what you consider to be intentional.
And that's where the law comes in!

How Insurance Failed One of My Clients.

A client of mine flipped a house and renovated it by replacing some of the plumbing underneath the house. However, my client told the buyer that all of the plumbing had been replaced underneath the house. But unfortunately she told the buyer in one email that all of the plumbing had been replaced.
As a result, my client was hit with a lawsuit alleging intentional fraud, an incident that insurance doesn't cover. Yet even after this simple misunderstanding, my client walked away from that lawsuit without paying a dime. This was all because she had a proper asset protection strategy in place.
At Royal Legal Solutions , we help real estate investors maximize their asset protection.
My name is Scott Smith. In addition to being an attorney, I'm a real estate investor myself. I created this company to help investors like you protect your assets. Don't wait until you get sued. Be proactive. Call Royal Legal Solutions now at [GLOBAL VAR=phone-number] to schedule your asset protection consultation today.

Introducing The Anonymous Trust LLC

One day you're living life, enjoying the profits from your real estate investments. The next day you're trying to figure out how you got sued. That's life.

One in Four Americans Will Be Sued

According to a Clements Worldwide study, Americans face the greatest risk for being sued. The risk is even higher if you own real estate. Are you willing to roll the dice on your future? Investing in real estate without asset protection is like betting against the house. You might come out on top, but you're more likely to lose everything.

Asset protection was a tool of the rich for generations. Regular folk usually weren't aware of strategies to protect wealth (such as the anonymous trust LLC), or they were unable to afford it. Today these techniques are accessible to everyone, thanks in large part to the introduction of two new legal structures.

The Series LLC Structure

In the past, investors held companies under their name or a single entity. This created a jackpot scenario, where successful litigators could access the person's entire wealth. Savvy investors would spread assets between multiple entities, but creating and maintaining a host of businesses proved too expensive for most.

The series LLC changed the way assets are held. It makes it possible to spread assets across multiple holding companies, but reduces the filing and management expense to that comparable with a single LLC. For more information, learn the basics of the LLC structure.

The Anonymous Trust LLC Structure

The problem with a series LLC is that you can still be sued one property at a time. It doesn’t make you invisible. This is where an Anonymous Trust LLC comes into play.

Using a trust in this manner allows you to hide the ownership information of your company, including its assets. As a result, plaintiffs are unable to identify you or target you based on whatever juicy assets may be ripe for the picking. That information is invisible.

A Lawsuit Can Affect More Than One Property

Just because your assets are wrapped up in a traditional LLC doesn’t mean you’re protected. Unlike the series LLC, where your assets are spread out individually, a traditional LLC groups assets into one basket. While there are some legal benefits to a traditional LLC, it still leaves you vulnerable to attack.
In any case, here's a short list of what you should and shouldn't do.

Asset Protection "Do"s and "Don't"s

1. Don't Hold Property Under Your Name

Individuals have the least protection of any entity. Maintaining ownership status as yourself is the worst possible scenario and leaves you open to the maximum level of risk. A simple mishap, such as someone slipping while on your property and being denied insurance coverage, could result in a devastating legal battle and even wipe out your life savings.

It’s essential to create a company structure to hold your assets separate. This will make your legal person litigation bullet proof.

2. Don't Hold All Property in a Traditional LLC

While this is a much better scenario than personal ownership, it still leaves you exposed to losing everything under the LLC’s ownership. Which means you could lose all your assets, not just one.

A series LLC, on the other hand will offer twice as much protection.

3. Don't Leave Yourself Exposed Because You’re A “Good Person”

Lawsuits have nothing to do with whether you mean well. Instead, most lawsuits are based on accidents and misunderstandings, not fraud or malicious intent. The purpose of asset protection is to provide coverage when things don’t go as planned. Ask yourself: “Would I be comfortable giving them access to my bank account or credit card?”

4. Do Get Professional Legal Advice

It's hard to tell if your LLC was filed correctly, but there are some common areas that account for the majority of mistakes:

  1. Was the LLC properly formed and maintained (requires an operating agreement and yearly state filings)?
  2. Did you properly sign for all the contracts and business dealings?
  3. Have you filed the appropriate franchise taxes to maintain good standing?
  4. Are all records, including accounting and banking information, current and accurate?

A single technicality can invalidate your protection, which is why we always recommend consulting a specialist in the field.

Insurance Won’t Protect Your Investments

Insurance companies are in the business of collecting premiums, not protecting their clients. They routinely look for ways to deny coverage as a way of lowering their costs.

It’s always a good idea to have an insurance plan, but you shouldn't assume they will pay by default. There are a variety of ways your coverage can be reduced or denied. These range from state and local policies to your payment status or specific instances surrounding your claim.

Are You Sure You Can Count On Your Insurance Company?

Successful investors are experts and managing risk. Purchasing insurance is a good example of this, but having a Plan B takes things to the next level.

Let’s go through a fictional scenario. Imagine one of your newly acquired properties has a rotting staircase and someone accidentally trips and breaks their toe.

Most people would expect the insurance company to cover this unfortunate incident, but this time the insurance company fights back. They claim you exhibited gross negligence and are individually responsible for your guest’s injury.

This lands you in a tricky situation. The best case scenario is to endure a series of stressful negotiations and come out on top. Unfortunately, this doesn't always occur and you could be left holding the bag, exposing your life savings and assets in the process.

Smart risk management requires good up front decision making, such as purchasing a solid insurance plan. But it also includes having a plan for when tragedy and the unexpected strikes. In this case, it means not only carrying insurance, but protecting yourself from potential failure of your insurance.

You Can Be Fully Protected Within A Week

Did you know it's possible to create a scalable company plan in as little as a week? This plan includes both the company setup and the transfer of properties to the new legal structure, and the benefits are legion.

Compared to traditional structures, our asset protection plan provides a layered defense against lawsuits. Not only do we split your assets across various holding companies, but we veil your wealth in anonymity. This strategy makes you unappealing to most would-be plaintiffs and makes your assets inaccessible to the rest.

Most people struggle to pay the upfront costs of a lawsuit and agree to split the winnings with their attorneys. An asset protection plan for Royal Legal Solutions costs less than the typical attorney fees for a single lawsuit and lasts for a lifetime.

Lawsuit prevention is important, but cobbling together a complex network of business entities can be difficult and expensive. Each LLC requires its own filing expenses and management. It adds up fast and the maintenance doesn't scale. Compare that to our custom solution, which provides no hidden costs and comprehensive service. If you want to learn more, contact us today.