What's the best way to protect yourself in CA? - Posted by JT (CA)

Posted by CH on April 21, 2002 at 14:45:57:

Hi Larry:

Do you think creditors will be sheilded because of the beneficial interest in the Land Trust? If so, I’d do some research…

Take Care,

What’s the best way to protect yourself in CA? - Posted by JT (CA)

Posted by JT (CA) on April 21, 2002 at 08:20:35:

Since forming an LLC and a C Corporation in California is not possible, what is the best way to protect yourself from predatory “lawsuits” when you buy property?

I plan to look into an S Corporation but am not sure if that necessarily is the answer since the previous two forms of companies is not possible.

California seems to be the most difficult state to create an “impenetrable fortress” in real estate but I know somehow some of the investors on this site has to have other ideas.

Is creating a land trust enough or the best way to go?

Thanks so much in advance for any suggestions.

JT (CA)

Re: What’s the best way to protect yourself in CA? - Posted by Mark (SDCA)

Posted by Mark (SDCA) on April 22, 2002 at 15:10:46:

The answer to your question is insurance. It is the cheapest and best way to protect yourself… and the most overlooked.

And in regards to your post… what makes you say that forming an LLC in Cali is impossible?

Mark

Re: What’s the best way to protect yourself in CA? - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on April 21, 2002 at 23:13:11:

JT–(CA)--------------

If you take title in some other name than your own, you will look like you have less assets and thus may discourage lawsuits against you. However, once you have a judgment against you, the attorney for the creditor can do an examination of assets and you have to tell what you have.

If your properties all have large loans secured against them, again, you look like you have little or no equity to go after. Doesn’t your sister-in-law want to have a huge deed of trust against you, with you having her signed “substitution of trustee and full reconveyance” in you file for future recording?

Lots of liability insurance.

Treat people honestly, nicely, decently, fairly. Hope they respond in kind.

Good Investing*************Ron Starr*****************

Re: What’s the best way to protect yourself in CA? - Posted by jom

Posted by jom on April 21, 2002 at 12:25:23:

Be careful of the Nevada C-corp in CA. You’ll still have to pay the franchise fee to do business in CA. The difference is that you get to skip the minimum franchise fee for TWO years if your C-corp is from CA. You still have to pay state corp taxes, it is just you don’t have a minium for the first two years.

What’s the best way? It depends on what you expect to make in the entity and your tax situation.

jom

Think about LP’s - Posted by CH

Posted by CH on April 21, 2002 at 11:59:56:

Hi JT:

First off, it is possible to set-up LLC?s and Corp.?s in CA. It?s just very costly compared to other states.

Here?s an idea. Put your properties into California Limited Partnerships (LP). LP?s have no minimum annual Franchise Board Tax fee and only cost around $70 for the Certificate of Limited Partnership. You?ll need to create a Corp or LLC to be the general partner in your deals. If you set-up a California Corp or LLC, you?ll have the $800 minimum Franchise Tax plus the cost to set-up the entity. If you?re doing a lot of deals, then maybe it makes sense. If you?re not, then think about setting up a Corp or LLC in another state like Nevada or Arizona.

Good Luck!
Craig

Re: What’s the best way to protect yourself in CA? - Posted by Larry in CA

Posted by Larry in CA on April 21, 2002 at 11:22:04:

JT, go out and buy “LLC makers” software at your local Fry’s or Best Buy etc. Then go on the web site for the California Secretary of State, click on business portal to check the name you want to use to see if it is available. Load your LLC maker, follow prompts and print out your Articles of Organization. File them with the Secretary of State. It takes all of about an hour. When you buy property, have the seller sign a grant deed to trustee, creat a land trust and have the seller transfer beneficial interest over to your LLC. Hope this helps.

Larry in CA

Re: What’s the best way to protect yourself in CA? - Posted by JT (CA)

Posted by JT (CA) on April 23, 2002 at 01:44:02:

From what I’ve learned from a couple of courses, insurance can only protect you so far, and it doesn’t really solve your problem of asset protection as a sole proprietor.

Regarding the LLC question I posted, someone did give me a couple of ideas on filing my articles of organization. I’ve filed a couple of times and was not approved. My problem was in the wording, I guess it can be construed as a professional services business if you mention something pertaining to real estate.

Thanks much for the suggestion!

Re: What’s the best way to protect yourself in CA? - Posted by CH

Posted by CH on April 21, 2002 at 13:21:30:

Entities that are set-up for investment purposes only do not have to file with a state as a foreign entity, and therefore do not have to pay a franchise tax. All other business entities have to file with a state as a foreign entity.

Re: What’s the best way to protect yourself in CA? - Posted by Don

Posted by Don on April 21, 2002 at 13:19:47:

It was two years initially, but they quietly changed it to one year.

Re: Think about LP’s - Posted by Ronald * Starr(in No CA)

Posted by Ronald * Starr(in No CA) on April 21, 2002 at 23:07:11:

CH----------

I agree with Don on this. Last I heard, $800 a year to maintain a limited partnership in CA.

I think one doesn’t have to pay to have a general partnership. But then, one would not be getting any asset protection either, would one?

Good InvestingRon Starr**

Re: Think about LP’s - Posted by Don

Posted by Don on April 21, 2002 at 13:17:49:

When I called the FTB about 2 years ago they said LP’s were subject to the $800 minimum tax just like Corp’s and LLC’s.

Has something changed?

Land Trusts have ZERO asset protection (nt) - Posted by CH

Posted by CH on April 21, 2002 at 13:11:41:

nt

Re: Land Trusts have ZERO asset protection (nt) - Posted by Larry in CA

Posted by Larry in CA on April 21, 2002 at 13:56:25:

CH the asset protection is in assigning beneficial interest to the LLC, not the land trust itself, I said that in my post.
Larry in CA