Legal Question in Real Estate Law in California

Re: Family LLC

Your question is a little bit confusing, but based on other clients prior sad experiences, I see a couple of issues. First, properties are usually transferred into the name of the LLC, for instance as a part of the members initial capital contributions. If the properties are not transferred into the name of the LLC, the LLC has a beneficial ownership of the property, but this is a point you have to argue about if a dispute arises. I don't understand your concern that "a property" you don't own could get sued? The only way I can interpret this is that you are asking if there is liability arising from the ownership of the property, can the LLC be drug into the lawsuit. Perhaps, on the basis of beneficial ownership and/or LLC operations relating to the property. Basically, this is where the question is very unclear. To get an appropriate response to your concern, you need to contact one of the attorneys offering a response and provide better details on what this LLC "looks like". Of course, the LLC is supposed to protect you individually from liability, but that protection may be pierced, just as a corporations "veil" may be set aside, in the event that the entity is not treated appropriately. Further, if there is property liability associated with a property still in your individual name, the LLC should indemnify you, and this issue needs clarification. With a family LLC, your concerns should be (1) is the entity being run appropriately so that the liabilities are encapsulated as much as possible into the entity and (2) is the LLC Operating Agreement drafted carefully so that everyone is in agreement about how the business is being run and how we determine what happens in the event of a dispute/dissolution. One of the problems that arises when doing business with family members is that everyone trusts each other and gets sloppy on these items. Everyone may be fantastic people, but when an honest issue arises, the family relationship ends up damaged because there are not sufficient records to reference and resolve the conflict. Protecting the family's long-term relationships as well as protecting the members from potential legal liabilities should be the result of appropriate legal counsel for any family-owned LLC. As to whether the properties should be held by more than one LLC, that answer depends on what the LLC is doing. In this case, some preventative legal counseling would be timely and is a good insurance investment for both the LLC and the family.

Re: Family LLC

Most real estate investors do a separate LLC for each and every property. Some who start a investment company make one LLC and they all join in on the profits and taxes of all the properties. LLC by definition reduces your personal liability but you will have accounting and tax issues involved so you might want to look into making an LLC for each and every property regardless of the # of owners. If you need a more personalized answer, contact my office.

Re: Family LLC

Keep in mind that for a property to be "in" a limiyed liability company, the LLC would have to own it completely. Any portion of title owned by you, rather than the LLC, is not "in" the LLC and the LLC affords no protection to you; in fact, your exposure to suit could even be increased.

Joining an LLC as a member is either a good deal, a bad deal, or indifferent, depending upon what you have to give up in money or personal ownership and control, versus what you get as measured by control, right to sahre in income, and in a lower but not insignificant rank, the value of the protection from personal liability gained.

My message to you is that your decision to participate or not should be based on fiancial and investment principles to a much greater extent than thoughts about liability.

For example, for a few thousand a year you can buy gobs of liability insurance; on the other hand, by an improvdent decision to commit property you own, manage and control to a family "conglomerate," you mighr be giving up property and income rights to the control of others that are worth much, much more.

The bottom line is that you should sign nothing until you have the advice of YOUR OWN sophisticated real estate or family-wealth advisor lawyer. Caution, caution.