Just weeks ago Tanner invested in a condo. It was one of several units in a large multi-unit building. In helping Tanner create his estate plan we had recommended a limited liability company (LLC) be established to hold investment property. Tanner agreed.
Days ago, Tanner sent us this photo of the building engulfed in flames! Evidently, a fire started in another unit and spread into the walls and roof. If the units were not destroyed by fire and smoke, they were by copious amounts of water. It was a total loss!
Fortunately, Tanner’s tenants were able to safely evacuate and insurance looks to cover the property losses. With the additional liability shield of the LLC, Tanner should be protected as well.
An LLC is a business entity designed for the purpose of protecting owners from personal liability for business operations and circumstances. As long as the requirements of an LLC are followed, the owners are protected from personal liability for the business’ activities. Litigation attorneys understand that they can always sue but it’s a long shot to prevail against owners of an LLC who have observed the rules and formalities the law requires.
If you rent property, commercial or residential, consider placing that property in an LLC. Shield the LLC’s assets and shield your personal assets. If you already have done so, good! Now make sure you are following the LLC rules in Utah and respecting the requirements. Do NOT mix personal assets with the LLC’s assets. Keep good books and records along with a separate business account. Remain adequately capitalized. Do NOT pay personal expenses with your business account. Don’t forget to update and file your annual report. Follow the rules of the operating agreement for holding meetings and performing daily operations.
Tanner will be able to start over and do so without needless worry or concern. You should make sure you could do the same if necessary. Even if you already have an LLC, note that five years ago, Utah’s LLC statute underwent a big revision. If you don’t have an operating agreement or have not had yours looked at since then, please come in for a review as soon as possible!