Atlanta, GA asked in Business Formation, Business Law and Real Estate Law for Florida

Q: Do I need to put each of my corporate leases into separate LLC for asset protection?

I have started a short term rental business and I am trying to scale.

3 Lawyer Answers
Jane Kim
Jane Kim PRO label
  • Naples, FL
  • Licensed in Florida

A: You don't "need" to do anything. But it would be wise to separate your business interests so that if one business gets sued and there is a judgment, other business endeavors are insulated.

Michael Ray Smith and Phillip William Gunthert agree with this answer

Michael Ray Smith

A: I agree with my colleague that separating real estate holdings into different LLCs is generally a good idea to protect each property from any liability that might arise from another property. It is important to manage each LLC as if it is truly a separate entity in order to prevent a court from piercing the corporate veil to allow the creditor to reach the owner's assets or to treat the LLCs as if they were a single entity under the alter ego doctrine. There's also the question of whether the owner's creditors can reach the assets within the LLCs, sometimes called reverse veil piercing.

You identified Florida as the state you're in. If you're thinking about setting up LLCs, you should talk to a Florida attorney. He or she may recommend that you organize your LLC(s) in another state.

Phillip William Gunthert agrees with this answer

Phillip William Gunthert
Phillip William Gunthert
  • Orlando, FL
  • Licensed in Florida

A: Rental business/property tends to be a high liability type of business and therefore you need to be sure to keep the business/properties compartmentalized from one another by limiting your potential exposure by separating all your businesses as much as you can. Separate LLC business entities is a wise choice where you keep property separated from one another or at least keep property with high equity separate. You will want to make sure that you are truly treating it separate, own bank account, proper type and levels of insurance, more than a single owner and so forth. Remember, it is easier to pierce a corporate veil business entity if you only have a single owner and or you are not treating it separate and distinct form yourself by not commingling funds and otherwise treating it as a real business separate from your personal life.

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