[quote=Fearful]Not sure if these are legitimate issues, but it seems to me:
– If the LLC owns real estate in California and is doing anything with that real estate (e.g. renting it to you) it is conducting business in California.
– If the LLC owns the real estate and lets you live in it rent free, it is not an arms length relationship.
– If the LLC exists for the purpose of protecting personal assets (i.e. has no or little business other than letting its owner live for free in the real estate it owns), then the courts might not provide protection of the company’s assets from the owner’s liabilities. The company is set up for little purpose other than acting as a shield, so the company’s function in that regard can be ignored. See “piercing the corporate veil”.
– Finally, I know well about companies being created to shield the owner’s assets from liability for the company’s actions, but not the other way around. If you own a company, and creditors come after you, the company (and its assets) are part of the pool of assets the creditors come after. The only thing I can think of is you hold a minority interest in the LLC, and so the majority’s interests are protected. So you have, say, 20% ownership of the LLC, which means you have 20% ownership of the house via the LLC … why not just give 80% of the house to someone else in the first place?
The whole thing sounds implausible to me, but I am no authority. Please, if you get an expert opinion on this, I would love to hear it.[/quote]
Hi Fearful,
Thanks for taking the time to comment. I did in fact talk to two lawyers that specialize in this in California and they both told me that you do NOT need to set up or report this or pay the $800 franchise tax fee to California. After I heard it one time I got a second opinion and he said the same thing.
Both did say that in essence the LLC would be “renting” the property to myself and he had the paperwork/contracts for this.
I realize any legal structure obviously isn’t perfect but I figure it’s best to do what is sound and to protect yourself the best that you can. Anyone can tell you that there isn’t a perfect system but it’s best to take the best steps so that is what I’m attempting to do.
I’d love to hear other legal opinions on this topic if any of you on the board are attorneys. Especially attorneys that specialize in Estate planning issues.
I don’t pretend to know the ins and outs on this topic as I certainly do not. When I was doing due diligence on it, even friends that are lawyers told me they don’t know anything at all about estate or asset protection and to talk to an attorney that specialized in asset protection so that is what I did. But of course I’d love to hear other lawyers points of views on it.
