Legal Question in Business Law in California

Re: LLC - Good or not?

The liability protection you get from Insurance Policy "X" and from being an LLC may overlap to a greater or lesser degree, but won't be identical. Therefore, this is to some degree a problem in analyzing the type of liability concerns you have.

Since you say "we," I wonder if you are operating as a general partnership (you could also be a couple managing community property). If so, there are additional reasons for being an LLC that insurance probably won't address, such as the ability of either/any partner to bind the other(s).

Also, liability concern isn't necessarily the only reason for an income-property owner to use an LLC; there can be tax advantages as well. However, such advantages arise mostly in comparison to incorporating and using an "S" tax election as opposed to remaining a sole proprietorship or partnership, which I guess you are now.

If you can afford it, you need advice from a tax specialist (CPA, tax planner or lawyer), a business lawyer, and your insurance agent before making a decision.