So we've been having discussion here about how to properly protect your personal RE investments. The general consensus has been to but the properties under and LLC. But I have a different take and look forward to comments.
At least under NC statutes, and LLC allows the following: (sorry for the length)
§ 57C‑3‑30. Liability to third parties of members, managers, directors, and executives; parties to actions; governing law.
(a) A person who is a member, manager, director, executive, or any combination thereof of a limited liability company is not liable for the obligations of a limited liability company solely by reason of being a member, manager, director, or executive and does not become so by participating, in whatever capacity, in the management or control of the business. A member, manager, director, or executive may, however, become personally liable by reason of that person's own acts or conduct.
(b) A member of a limited liability company is not a proper party to proceedings by or against a limited liability company, except where the object of the proceeding is to enforce a member's right against or liability to the limited liability company.
(c) The liability of members, managers, directors, and executives of a limited liability company formed and existing under this Chapter shall at all times be determined solely and exclusively by this Chapter and the laws of this State.
(d) If a conflict arises between the laws of this State and the laws of any other jurisdiction with regard to the liability of members, managers, directors, or executives of a limited liability company formed and existing under this Chapter for the debts, obligations, and liabilities of the limited liability company, this Chapter and the laws of this State shall govern in determining the liability. (1993, c. 354, s. 1; 2001‑387, s. 69.)
§ 57C‑3‑31. Mandatory indemnification of managers, directors, executives, and members.
(a) Unless otherwise provided in the articles of organization or a written operating agreement, a limited liability company must indemnify every manager, director, and executive in respect of payments made and personal liabilities reasonably incurred by the manager, director, and executive in the authorized conduct of its business or for the preservation of its business or property.
(b) Unless otherwise provided in the articles of organization or a written operating agreement, a limited liability company shall indemnify a member, manager, director, or executive who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which the person was a party because the person is or was a member, manager, director, or executive of the limited liability company against reasonable expenses incurred by the person in connection with the proceeding. (1993, c. 354, s. 1; 2001‑387, s. 70.)
§ 57C‑3‑32. Limitation of liability of managers, directors, executives, and members and permissive indemnification of managers, directors, executives, and members; insurance.
(a) Subject to subsection (b) of this section, the articles of organization or a written operating agreement may:
(1) Eliminate or limit the personal liability of a manager, director, or executive for monetary damages for breach of any duty provided for in G.S. 57C‑3‑22 (other than liability under G.S. 57C‑4‑07); and
(2) Provide for indemnification of a manager, member, director, or executive for judgments, settlements, penalties, fines, or expenses incurred in a proceeding to which the member, manager, director, or executive is a party because the person is or was a manager, member, director, or executive. For purposes of this subdivision, the words "expenses", "proceeding", and "party" shall have the meanings set forth in G.S. 55‑8‑50(b).
(b) No provision permitted under subsection (a) of this section shall limit, eliminate, or indemnify against the liability of a manager, director, or executive for (i) acts or omissions that the manager, director, or executive knew at the time of the acts or omissions were clearly in conflict with the interests of the limited liability company, (ii) any transaction from which the manager, director, or executive derived an improper personal benefit, or (iii) acts or omissions occurring prior to the date the provision became effective, except that indemnification pursuant to subdivision (2) of subsection (a) of this section may be provided if approved by all the members. As used in this subsection, "improper personal benefit" does not include reasonable compensation or other reasonable incidental benefit for or on account of service as a manager, director, executive, officer, employee, independent contractor, attorney, or consultant of the limited liability company.
(c) A limited liability company may purchase and maintain insurance on behalf of an individual who is or was a manager, director, executive, officer, employee, or agent of the limited liability company, or who, while a manager, director, executive, officer, employee, or agent of the limited liability company is or was serving at the request of the limited liability company as a director, executive, officer, partner, member, manager, trustee, employee, or agent of a person, against liability asserted against or incurred by the person in that capacity or arising from the person's status as a manager, director, executive, officer, employee, or agent, whether or not the limited liability company would have the power to indemnify the person against the same liability under any provision of this Chapter. (1993, c. 354, s. 1; 1995, c. 351, ss. 8, 9; 1999‑189, s. 4.4; 2000‑140, s. 101(t); 2001‑387, s. 71.)
Reading deep into the sections, wouldn't it be reasonable to think:
- Own properties as H&W (hus and wife)
- Form and LLC management company to oversee them (I manage my own properties now, no PM's [prop managers])
- do business under a seperate DBA
- move "operations" out of the personal home and establish a "location" for the LLC
with the amount of indemnity that the LLC provisions offer, and the ability to insure said entity as well as the "manager", it would seem reasonable to me that, although at arms length, its similar to an "S" corp in the sense of corporate veil, but with greater personal and entity protection. With the op's outside of the home, my wife wouldn't be subject to "known" info as it pertains to being a liable party. As well, she would not have any part of the LLC and would need to be, to be sued as a "party to".
My regular attorney (for closings) over the years has become candid when dealing with me and still holds firm that held as H&W is the safest way to own, but from a management side, would the above no do a good job of shielding?
At least under NC statutes, and LLC allows the following: (sorry for the length)
§ 57C‑3‑30. Liability to third parties of members, managers, directors, and executives; parties to actions; governing law.
(a) A person who is a member, manager, director, executive, or any combination thereof of a limited liability company is not liable for the obligations of a limited liability company solely by reason of being a member, manager, director, or executive and does not become so by participating, in whatever capacity, in the management or control of the business. A member, manager, director, or executive may, however, become personally liable by reason of that person's own acts or conduct.
(b) A member of a limited liability company is not a proper party to proceedings by or against a limited liability company, except where the object of the proceeding is to enforce a member's right against or liability to the limited liability company.
(c) The liability of members, managers, directors, and executives of a limited liability company formed and existing under this Chapter shall at all times be determined solely and exclusively by this Chapter and the laws of this State.
(d) If a conflict arises between the laws of this State and the laws of any other jurisdiction with regard to the liability of members, managers, directors, or executives of a limited liability company formed and existing under this Chapter for the debts, obligations, and liabilities of the limited liability company, this Chapter and the laws of this State shall govern in determining the liability. (1993, c. 354, s. 1; 2001‑387, s. 69.)
§ 57C‑3‑31. Mandatory indemnification of managers, directors, executives, and members.
(a) Unless otherwise provided in the articles of organization or a written operating agreement, a limited liability company must indemnify every manager, director, and executive in respect of payments made and personal liabilities reasonably incurred by the manager, director, and executive in the authorized conduct of its business or for the preservation of its business or property.
(b) Unless otherwise provided in the articles of organization or a written operating agreement, a limited liability company shall indemnify a member, manager, director, or executive who is wholly successful, on the merits or otherwise, in the defense of any proceeding to which the person was a party because the person is or was a member, manager, director, or executive of the limited liability company against reasonable expenses incurred by the person in connection with the proceeding. (1993, c. 354, s. 1; 2001‑387, s. 70.)
§ 57C‑3‑32. Limitation of liability of managers, directors, executives, and members and permissive indemnification of managers, directors, executives, and members; insurance.
(a) Subject to subsection (b) of this section, the articles of organization or a written operating agreement may:
(1) Eliminate or limit the personal liability of a manager, director, or executive for monetary damages for breach of any duty provided for in G.S. 57C‑3‑22 (other than liability under G.S. 57C‑4‑07); and
(2) Provide for indemnification of a manager, member, director, or executive for judgments, settlements, penalties, fines, or expenses incurred in a proceeding to which the member, manager, director, or executive is a party because the person is or was a manager, member, director, or executive. For purposes of this subdivision, the words "expenses", "proceeding", and "party" shall have the meanings set forth in G.S. 55‑8‑50(b).
(b) No provision permitted under subsection (a) of this section shall limit, eliminate, or indemnify against the liability of a manager, director, or executive for (i) acts or omissions that the manager, director, or executive knew at the time of the acts or omissions were clearly in conflict with the interests of the limited liability company, (ii) any transaction from which the manager, director, or executive derived an improper personal benefit, or (iii) acts or omissions occurring prior to the date the provision became effective, except that indemnification pursuant to subdivision (2) of subsection (a) of this section may be provided if approved by all the members. As used in this subsection, "improper personal benefit" does not include reasonable compensation or other reasonable incidental benefit for or on account of service as a manager, director, executive, officer, employee, independent contractor, attorney, or consultant of the limited liability company.
(c) A limited liability company may purchase and maintain insurance on behalf of an individual who is or was a manager, director, executive, officer, employee, or agent of the limited liability company, or who, while a manager, director, executive, officer, employee, or agent of the limited liability company is or was serving at the request of the limited liability company as a director, executive, officer, partner, member, manager, trustee, employee, or agent of a person, against liability asserted against or incurred by the person in that capacity or arising from the person's status as a manager, director, executive, officer, employee, or agent, whether or not the limited liability company would have the power to indemnify the person against the same liability under any provision of this Chapter. (1993, c. 354, s. 1; 1995, c. 351, ss. 8, 9; 1999‑189, s. 4.4; 2000‑140, s. 101(t); 2001‑387, s. 71.)
Reading deep into the sections, wouldn't it be reasonable to think:
- Own properties as H&W (hus and wife)
- Form and LLC management company to oversee them (I manage my own properties now, no PM's [prop managers])
- do business under a seperate DBA
- move "operations" out of the personal home and establish a "location" for the LLC
with the amount of indemnity that the LLC provisions offer, and the ability to insure said entity as well as the "manager", it would seem reasonable to me that, although at arms length, its similar to an "S" corp in the sense of corporate veil, but with greater personal and entity protection. With the op's outside of the home, my wife wouldn't be subject to "known" info as it pertains to being a liable party. As well, she would not have any part of the LLC and would need to be, to be sued as a "party to".
My regular attorney (for closings) over the years has become candid when dealing with me and still holds firm that held as H&W is the safest way to own, but from a management side, would the above no do a good job of shielding?
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