A few weeks back I got into a yelling match with another attorney. A real shocker right?
This attorney said his particular strategy was the best for our mutual client because this attorney happened to work for another firm that offered asset protection. Never did comprehend how his past employment provided a legal basis for a structure.
Out of curiosity I pulled up a list of entities he was involved with just to see how he did things. One of the LLCs caught my eye, it had a name substantially similar to XYZ’s CA Rentals, LLC. Ok, makes sense. Easy to remember and keep track of, it obviously held all of XYZ’s CA properties.
Yep, when I searched a database of properties in California, I found that this particular LLC owned a few properties in California. Here’s the problem though. The LLC was not a California LLC. As you may or may not know California is very strict about if a LLC conducts business in California, CA wants the LLC to register and pay California taxes. If it doesn’t register the penalties can get pretty draconian really fast.
Next I went to Zillow to check up on one of the properties. Yep, there was a write up offering to rent the property owned by this non-CA property.
Bottom line is the way this LLC was structured it was going to generate some hefty fines for XYZ, whose name was literally right on the LLC.
Which brought up the next issue, privacy. You think XYZ would have a hope denying they own the property when the name of the LLC is XYZ’s LLC? Probably not. Additionally, a title search of the property shows a complete trail of an XYZ deeding the property into the XYZ CA Rentals LLC.
By the way, I spent maybe 7 or 8 minutes with these various searches. How hard is it going to be for a state employee to do the same thing?
If you are looking for asset protection and privacy a LLC probably isn’t going to be your best choice. Going a step further, a LLC with your name in it is an awful choice. Another awful choice is ignoring the laws of the state that you invest in, and not registering your LLC in that state. I know that in California the penalties can be thousands of dollars each year.