Ask a Lawyer - Archive

My son currently owns rental property and he has purchased another property to be used as a daycare and he has a nonprofit foundation. Would it be wise for him to put all these entities under one LLC or put them in another person's name to protect his liability?

From a liability standpoint, the safest way to hold title to rental property is probably through a limited liability company (LLC). It would be even safer to hold title to each property in a separate stand alone or single purpose LLC. (One issue if multiple properties are put in the same LLC is that creditors of the LLC would have more assets to go after.) You could also hold title through a corporation, but this could have tax consequences that are not as favorable and could actually work to your son's disadvantage. But there are pluses and minuses to everything. If title is in an LLC, you may not be able to do a 1031 exchange.

Maintaining separate entities can also be expensive and time consuming. The nonprofit foundation is presumably a separate nonprofit corporation, which might also be able to hold title, but there are a lot of considerations to take into account before reaching a decision on that front. Putting title in another person's name would not seem to make sense and might only cause problems for your son. Go see a real estate or business lawyer to get some advice specific to his situation on proper structuring of the ownership arrangements.