Legal Question in Real Estate Law in Washington

best way to set-up initial corp structure for real estate development

Hi,

I have recently (last 2 years) acquired about 15 rental properties, about 7 will be sold within the next 12-18 months. About 5 of them can be redeveloped--i.e. they can have homes added to the lot, or can be torn down and have condos built on the lot.

I have homeowners insurance, umbrella policy, etc. I've heard it is a good idea to set-up corporations as a further liability protection, both for owning rentals, as well as especially for going into a construction project.

So, I'm looking for overall advice in doing this--also a specific question, should I make an overall holding corporation that would then in turn own around 3-5 other corporations that would hold ownership to the actual properties?

The advantage as i see it of a holding company, is that marketing-wise, I have a consistent name as a developer, it could make it easier to talk to banks, other professionals, etc.

The disadvantage that I have heard is that it may be possible in some cases to expose onself to liability in case a child corporation is sued and somehow the holding company is also sued, then everything could be wide open to potential risk.

Any advice or insights would be much appreciated in how to best set thngs up!


Asked on 9/27/06, 8:17 pm

1 Answer from Attorneys
Matthew King Wershow & Ritter, Inc. P.S.

Re: best way to set-up initial corp structure for real estate development

As in most legal issues the answer depends. If your goal is to minimize personal liability, then corporate formation can benefit you. If, however, there are other issues to be considered (such as trade name recognition, etc.) other methods should be used.

Please feel free to contact me to discuss this matter further.

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Answered on 9/27/06, 8:24 pm


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