If you’re a real estate or business investor looking to acquire commercial real estate and/or business assets, be sure you do so in the name of a limited liability company (also known as an “LLC.”). Why you might ask? Simply put, an LLC can help shield your personal assets (i.e. personal residence, personal vehicle, etc.) from liabilities borne from the LLC.
But be careful, because for many entrepreneurs, a single LLC may not be sufficient. This is often the case when an entrepreneur wishes to separate assets in order to avoid potential cross-liabilities.
What type of entrepreneurs typically benefit from separating assets into separate entities?
- Real estate investors with multiple holdings
- Entrepreneurs who wish to separate business operations from real estate holdings
- Entrepreneurs with multiple distinct businesses
What are some of the benefits of separating assets?
Protection of Assets. Separation can help to protect assets from the liabilities of other assets. For example, if a real estate investor has multiple real estate holdings held in separate and distinct entities, the creditors associated with a premises liability claim on the real estate held in one LLC will generally not have the ability to attach to real estate held in a separate LLC.
Estate Planning. Separating assets can help you with estate planning. For example, if an entrepreneur’s real estate assets are separated from business operational assets, the separation allows the entrepreneur to gift the operational assets while maintaining the interest in the real estate (or vice versa).