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December 20, 2023 | read

With Real Estate You’re Bound To Be Sued At Some Point, Get Protected

Scott Smith

Over at Royal Legal, we talk a great deal about asset protection. Investors can face a large amount of exposure in terms of litigation. But there are a number of methods that we encourage our clients to implement in order to insulate both their assets from litigation and themselves from litigation against their assets.

Many of our clients have an interest in real estate, and why not? It’s a booming market right now all across the country. High demand coupled with low inventory has seen real estate prices skyrocket even in cities like Buffalo where real estate is notoriously inexpensive.

The real estate market has indeed rebounded after the veritable cataclysm of the housing collapse that began 10 years ago. Today, it’s as solid an investment as any you’ll find. Nonetheless, there are threats to any investment, and real estate owners, whether they own commercial or residential properties, are bound to get sued at one point or another.

But that doesn’t mean you have to be a sitting duck. There are ways to protect your assets from lawsuits, make yourself and your assets much more difficult to sue, and drive up the cost of litigation against you to discourage lawyers from pursuing action.

Today, we’re going to talk about one such method using Series LLCs.

Using Series LLCs to Protect Your Assets

It helps to think of an LLC as a container that has certain qualities or attributes. Among those attributes is the ability to contain other LLCs. LLCs contained within other LLCs are known as series LLCs, and a “parent” LLC can contain as many LLCs as you please.

Nesting LLCs in this fashion has several benefits. But let’s answer the question at hand. How do series LLCs protect your assets?

Series LLCs effectively isolate your assets from one another and from you. They allow you to have full liability protection for each asset contained in a series. Practically speaking, it makes you, as an investor, more time-consuming and labor-intensive to sue. Here’s why:

Your Series LLCs Protect Your Identity

Step one to suing you is figuring out who you are. Any lawyer that would bring a suit against you needs to know that first. It takes time, resources, and money to track you via your series LLC. In other words, a lawyer would find it a more lucrative option to go after lower hanging fruit. They can sue the assets or the series LLC, but that is also more difficult.

Series LLCs Isolate Your Assets from One Another

Since, theoretically, every asset is contained in its own series LLC, only one asset is vulnerable at any given time. An individual bringing a suit against you cannot, therefore, target other assets held in another series.

Series LLCs Discourage Litigation

The fundamental advantage of protecting your assets in this manner is that it discourages trial lawyers from bringing suits against you. In other words, it lowers their potential reward while simultaneously increasing the man hours required to even target your assets. Meanwhile, assets held in your own name render you a sitting duck.

While there is no sure-fire method to prevent lawsuits from ever being filed against you, you don’t have to leave yourself vulnerable to every trial attorney in the state, and you can also mitigate the damage they do, even if they win.