California LLCs - Posted by Bryan in Cali

Real Estate Investing
#1

Posted by David H on March 13, 2002 at 20:07:38:

>I’m no expert on this, but what you’re describing
>sounds like “piercing” the corporate veil. If you >don’t run the corporation like a corporation or
>engage in illegal actvity this can happen. However, >that is not a normal occurrance

“Piercing the veil” would be to sue and reach someone, like a shareholder, who is not involved in the day to day operations of the company. Suing the company and the directors/officers is not “piercing the veil” - by suing an officer, you are suing them for their personally negligent (or whatever) behavior in the performance of their duties for the company. It has nothing to do with whether or not one operates the corporation properly.

>Otherwise it would be useless to incorporate.

It’s not useless for shareholders who aren’t officers or directors of the company. D&O Liability insurance is a “real” product - I only quoted one reference to the topic of many, you could find many more others. Why do you think anyone would offer, or buy this product?

>As an aside I wouldn’t trust an article about why you
>need to buy insurance that is written by the >insurance company trying to sell you the insurance.

And I wouldn’t trust an article about why I need an LLC written by someone trying to sell me the package to create the LLC. Would you?

#2

California LLCs - Posted by Bryan in Cali

Posted by Bryan in Cali on March 10, 2002 at 14:30:57:

I was reviewing Bronchick’s l/o course last night and he recommends that you have an LLC set up before doing l/o’s. The problem is that once you file for an LLC here in California you have to pay an upfront tax of $800 within 90 days. I don’t have that kind of money. And furthermore I’ve heard that your LLC has to be in CA if you’re doing RE transactions in CA. Any advice?

#3

Re: California LLCs - Posted by David H

Posted by David H on March 10, 2002 at 23:09:09:

That sounds about right…and you’ll have to pay that franchise tax every year. If you form your LLC elsewhere - Nevada, as an example - you’ll have to register as a foreign corporation within California and pay the $800 tax as a foreign company. The point is that any LLC doing business in California has to register.

The thing I’ve never understood is how setting up an LLC can force plaintiffs to never name the principal personally, as well as the LLC, in a suit.

#4

Re: California LLCs - Posted by Dave

Posted by Dave on March 13, 2002 at 14:59:00:

There’s nothing to stop them from naming the principals, but this is like naming shareholders when filing a lawsuit against a big corporation.

#5

LLC, Corp, and D&O Liability Insurance. - Posted by David H

Posted by David H on March 13, 2002 at 15:50:42:

If you’re forming corps/LLCs for RE and naming yourself an officer of the company, you need D&O insurance as well!

http://cber.chubb.com/products/ps-dando.asp

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#6

Re: California LLCs - Posted by David H

Posted by David H on March 13, 2002 at 15:32:28:

In the case of a single person using a single-member LLC to run an R/E business, that “shareholder” is not merely a shareholder, but an officer of the corporation who is responsible for day to day operating activities of the company. What I’m saying is that a person may name the company, and the officers directly. I certainly would, if I was suing somebody. Even outside directors of corporations carry liability insurance (well, the company pays for it) to protect themselves in the event of being named personally.

#7

Re: LLC, Corp, and D&O Liability Insurance. - Posted by Dave

Posted by Dave on March 13, 2002 at 18:22:08:

I’m no expert on this, but what you’re describing sounds like “piercing” the corporate veil. If you don’t run the corporation like a corporation or engage in illegal actvity this can happen. However, that is not a normal occurrance. Otherwise it would be useless to incorporate.

As an aside I wouldn’t trust an article about why you need to buy insurance that is written by the insurance company trying to sell you the insurance.