As people accumulate property or businesses, limited liability companies (LLCs) become a regular topic of discussion. In fact, I work with one client who has created four LLCs in just the last two years.
What is an LLC? As the name suggests, it’s a special-purpose company intended to limit your liability, or exposure, to losses should somebody sue you. For example, if somebody falls down the stairs of your apartment complex owned by an LLC, assuming the LLC is structured and maintained properly, the injured person’s damages should be limited to the value of the property in the LLC, rather than your entire estate.
You can put a variety of assets into an LLC, including real estate, publicly traded securities and business entities. The name of the LLC can be just about anything you want as long as someone else hasn’t already secured it. It could be named after your family or trust, or be something simple or creative to keep the owner anonymous. For example, it’s common for real estate LLCs to be named after the address, such as 123 Main St. LLC.
LLCs may be a viable alternative to large umbrella insurance policies. They can also be useful for estate planning and privacy. But an LLC is complex and has its own unique costs, so it definitely requires careful review of your personal situation to see if it’s right for you.
Here’s what you need to know as you make that decision.
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