Difficult question because it depends a great deal on your individual risk tolerance. However, let me make a couple of points from an accountant’s perspective that may be helpful in assessing your situation and the best course of action to take. When it comes to business incorporation we should always get the expert’s advice.
For a question like “How many?”..the answer is ‘as many as you want’. There is no limit. You simply deed the properties into your LLC. Make sure you look at local (state and county) rules that may apply in regards to transfer taxes (i.e. Florida and Washington State).
The downside to having too many properties in one LLC is that the risk and liability of each property affects the others. For example if you have 5 properties in one LLC and the LLC gets sued on property 2, then that judgment will affect and be applied against all other properties in the LLC.
The question then becomes how many properties should you put in your LLC. In my opinion, this really comes down to the amount of equity you have in each one of your properties, where they are located and which properties have the most risk of a potential law suit.
Some general rules are:
- you want to keep your high equity properties separate from your high risk properties;
- consider grouping low equity properties together, while high equity properties may need their own LLC;
- when the equity in your LLC gets too high, consider transferring some of the properties out to a new LLC and separate your ‘eggs into different baskets’ and;
- if you have properties in a state that allows series LLC’s consider setting up or converting to a Series LLC.
It is critical that your LLCs are registered in the State where the property or properties exist and company maintenance should be a priority.
Please call us 773-728-1500 for any questions you may have regarding business incorporation, we the Chicago accountants are here to help you out!