Registering new LLC in Maryland or Delaware

Normally if you create the LLC in Maryland, it will also have to qualify to do business in Delaware. In other words you'll end up paying administrative fees and perhaps additional taxes in both states. If you create the LLC in Delaware you cut down on the bureaucracy and probably expense.

This varies by state, though, so you should talk with a local lawyer to determine how it works where you are.

If there's not a change in the underlying ownership, it's normally not a problem. Your loan documents may even specify that you can do that - take a look at them.

Why do you believe an LLC will limit your personal liability in any way? Unless your LLC has employees who are not answerable to you, you will be personally liable for anything that you do that causes damage to others. I cannot imagine your LLC will hire people who do not answer to either you or your husband.

I suggest you discuss this idea with an attorney who is not going to get an extra fee from you if you decide to go ahead with this LLC idea.

A person is liable for his own tortuous conduct, so a corporation or LLC won't help for those. For for contract matters or the torts of employees or contractors, the LLC may limit personal liability.

What is "tortuous conduct"?

My LLC will not have employees. I am worried about being sued by a renter who might slip off the toilet seat and sue me because the toilet was not stable. I actually heard that given as an example by Ray Lucia, a financial planning talk show host. Apparently that happened to someone and the person won an $8M lawsuit against a hotel. I keep reading that rental properties should be owned by LLCs because of the liability issue. There are a lot of articles on the internet that advocate this, but most are written by attorneys or financial planners. My tax accountant says she has heard of rental properties in LLCs, but not necessarily vacation homes where only a percent of the expenses are deductible. This is all so complicated! I've already increased my umbrella insurance policy. Maybe I'll increase it some more and forget this whole LLC idea.

Maria

Behavior that damages another person.

Depending on who installed the toilet seat and who supervised the person who installed it, an LLC may or may not protect you in this situation.

Even if the LLC protects you, you can lose the entire property in a lawsuit. Much better is to get good insurance. That way you are unlikely to lose the property. And someone will pay your attorneys fees if the suit is frivolous.

Again, insurance won't protect you against intentional torts, and is unlikely to protect you for breach of contract. An LLC won't help with the first of those, but could with the other.

"Tortuous conduct" is, like, sorta in the middle, you know. It's not quite torturous and not quite tortious. The important thing about tortuous conduct is that holding your property in an LLC won't protect you from being sued for it.

Tortuous conduct is well defined in the law, and generally encompasses any kind of wrongful personal injury.

Again, that's only true to the extent that the taxpayer herself is being sued for her own tortuous conduct. If the company is being sued for the wrongful conduct of an agent or employee, the LLC will protect the owner who did nothing improper herself.

To me the major downside is that, even if the case of an employee engaging in wrongful conduct, the taxpayer can lose her whole investment in the LLC - just nothing beyond that investment. But that can be a heck of a lot of money.

This is the kind of thing you can insure against. So with a large investment it's foolish not to have insurance.

It's just a spelling thing:

Tortious, Tortuous, Torturous.

IANAL

That is an excellent point. Many people form out-of-state corps only to learn the hard way that they also have to file in-state if they are running their business in-state.

I am not current on Banking laws and regs, but back in the days of "Iron Men and Wooden Ships" I purchased a house and put into a Trust. Unless your lender prohibits that, you can put the house into a Trust with the LLC as the owner.

To avoid all of this, contact your hazard insurance carrier. If you have your all of your home and auto insurance with them, they can write you a high coverage Umbrella policy for close to the initial and continuing legal fees of incorporation. If I recall correctly, my Umbrella policy with Geico. I know the premium is $274.90. The coverage is either $500K or $1M. I can't look it up at the moment as childbride does not allow me to go into the file cabinet. ;)

Dick

Most if not all residential mortgages I have seen contain a provision that any change of ownership is considered a default, and the lender has the right to call the loan immediately, even if all payments are current. I have never seen a bank call a loan when property was transferred to a trust.

Excellent point and excellent value. An EA I work with here in California estimates that the additional costs of using a corporation or LLC can be as much as $2,000 per year (including the state's $800 minimum tax). Insurance could be less expensive and much better protection.

Oh, is that where you keep your Scotch? :-0

My experience is also that transferring propriety to a trust does not trigger a "due on sale" clause. However, one of the advantages of a holding property in a trust is the ability to sell the trust without triggering "due on sale" clause. So go figure?

It should be noted the attornies who will represent you on behalf of your insurance carrier are the most vicious, cut-throat SoB's (meant as a professional compliment) on the planet.

No, I keep Scotch and Drambuie in my downstairs fridge and all other liquor in a closet down there. Susan claims that I only know how to keep computerized records.

Dick

One thing I've seen a lot is that banks don't like to give mortgages to trusts. If you want to refinance property in a trust, for example, the bank has the property taken out of the trust first. But usually they don't put it back in when the transaction is complete. I've gotten work from families who thought they would avoid probate with a trust, only to find out later that their property wasn't in a trust after all.

I think it's what the CIA did to some of those terror suspects ....

I suspect Stu meant "tortious."

Katie in San Diego

I don't know what Stu meant but I did, indeed, mean "tortious." Tortuous more accurately describes, sometimes, the legal proceedings initiated because of someone's alledged tortious conduct.

Yes, you're right. Thanks. Sometimes my fingers type faster than my brain thinks.