Getting Homeowner’s insurance policy for LLC?

[SK in CV]

[quote=earlyretirement]Hi SK in CV,

Actually, no…. according to the lawyer, the LLC doesn’t need to be registered in California as no business is being conducted. In Delaware there is a $200 annual fee/tax.

See this:

http://www.aoausa.com/Articles/2010/February/12.pdf

I’ve done some research online and it seems like some people are getting homeowner’s insurance but just not so easy like an individual.

No, there is no pending bankruptcy (actually I have no debt whatsoever). As mentioned, the goal of this is simply asset protection. People that have no assets or tons of debt don’t really have to worry about asset protection I wouldn’t think…

What I meant by the “homestead exemption” was that you can’t lose your house in Texas due to some frivolous lawsuit or something else. I know that many many people in California use Living Trusts but those don’t seem to do anything for asset protection.

Again, I’m not sure why an insurance company would have a problem with this if they simply understood that there is no business being conducted at all. They have no more risk vs. it being in my own name. The house won’t be rented out and we would be the only ones using it. Heck, we wouldn’t even have a mortgage on the property.

Of course I’ll still get an umbrella coverage policy but my main goal is getting the home insured with the same price as an individual homeowner’s policy.[/quote]

You could be right on the purchase and owning of the property. But renting it or selling it would qualify as “doing business”.

I explained why an insurance company would have a problem. LLC’s don’t have a primary residence. Real people do. You are not the same as an entity you own. Exactly the same reason a lender is unlikely to make a loan to an LLC in this circumstance. Same with the IRS. Primary residence benefits don’t all flow through.

If bankruptcy isn’t a current issue (which is pretty much the only time a homeowners exemption would come into play), just buy insurance. It’s cheaper, simpler, and probably more effective.

[earlyretirement]

[quote=SK in CV]

just buy insurance. It’s cheaper, simpler, and probably more effective.[/quote]

Actually I’d love to just buy a homeowner’s policy under my own name. The only thing I worry about is if there is some major loss like a fire, I would just want to make sure an insurance company doesn’t try to weasel out of paying because my name isn’t on the title deed. I’d have to have it in writing they understand the situation.

Really I’m not worried about any loss except to cover a fire since I know wildfires are a concern in some areas.

[earlyretirement]

[quote=SK in CV]

just buy insurance. It’s cheaper, simpler, and probably more effective.[/quote]

Actually I’d love to just buy a homeowner’s policy under my own name. The only thing I worry about is if there is some major loss like a fire, I would just want to make sure an insurance company doesn’t try to weasel out of paying because my name isn’t on the title deed. I’d have to have it in writing they understand the situation.

Really I’m not worried about any loss except to cover a fire since I know wildfires are a concern in some areas.

[earlyretirement]

[quote=SK in CV]

just buy insurance. It’s cheaper, simpler, and probably more effective.[/quote]

Actually I’d love to just buy a homeowner’s policy under my own name. The only thing I worry about is if there is some major loss like a fire, I would just want to make sure an insurance company doesn’t try to weasel out of paying because my name isn’t on the title deed. I’d have to have it in writing they understand the situation.

Really I’m not worried about any loss except to cover a fire since I know wildfires are a concern in some areas.

[earlyretirement]

[quote=SK in CV]

just buy insurance. It’s cheaper, simpler, and probably more effective.[/quote]

Actually I’d love to just buy a homeowner’s policy under my own name. The only thing I worry about is if there is some major loss like a fire, I would just want to make sure an insurance company doesn’t try to weasel out of paying because my name isn’t on the title deed. I’d have to have it in writing they understand the situation.

Really I’m not worried about any loss except to cover a fire since I know wildfires are a concern in some areas.

[earlyretirement]

[quote=SK in CV]

just buy insurance. It’s cheaper, simpler, and probably more effective.[/quote]

Actually I’d love to just buy a homeowner’s policy under my own name. The only thing I worry about is if there is some major loss like a fire, I would just want to make sure an insurance company doesn’t try to weasel out of paying because my name isn’t on the title deed. I’d have to have it in writing they understand the situation.

Really I’m not worried about any loss except to cover a fire since I know wildfires are a concern in some areas.

[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.

[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.

[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.

[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.

[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.

[SK in CV]

[quote=Fearful]
– 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. [/quote]

That’s a great point that I completely missed! Ownership of the home inside an LLC offers zero protection against creditors. Even worse than relatively small homeowners exemption, there is NO exemption. It would be subject to the exact same exposure to creditors as ownership of stock in a publicly traded company.

[SK in CV]

[quote=Fearful]
– 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. [/quote]

That’s a great point that I completely missed! Ownership of the home inside an LLC offers zero protection against creditors. Even worse than relatively small homeowners exemption, there is NO exemption. It would be subject to the exact same exposure to creditors as ownership of stock in a publicly traded company.

[SK in CV]

[quote=Fearful]
– 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. [/quote]

That’s a great point that I completely missed! Ownership of the home inside an LLC offers zero protection against creditors. Even worse than relatively small homeowners exemption, there is NO exemption. It would be subject to the exact same exposure to creditors as ownership of stock in a publicly traded company.

[SK in CV]

[quote=Fearful]
– 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. [/quote]

That’s a great point that I completely missed! Ownership of the home inside an LLC offers zero protection against creditors. Even worse than relatively small homeowners exemption, there is NO exemption. It would be subject to the exact same exposure to creditors as ownership of stock in a publicly traded company.

[Author]

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