I am a resident of Wisconsin. Looking to purchase my first rental property in Minnesota. I have a current net worth of $1M. I'm trying to figure out if I need to start an LLC for the rental property or can I do it personally with an umbrella policy (~ $2M) to protect my assets. I do not plan on investing in any more properties at this point.
Savings from not doing the LLC are significant (interest rates, paperwork, etc.). Not interested in tax savings gained from an LLC-purely interested in protecting my family assets.
The protection afforded by an LLC is not the same as that available through an insurance policy. Assuming the LLC is properly formed and operated, you will not be personally responsible or liable for any obligations of the LLC. By contrast, an insurance policy has a fixed dollar limit on coverage, exclusions, and deductibles, and can terminate or lapse. You should weigh those differences against the cost differential and the likelihood of a substantial claim from your particular business in determining which approach best suits your needs.
The foregoing discussion does not establish an attorney-client relationship, is qualified by the limited facts presented above, and should not be relied upon as legal advice. To obtain definitive legal advice upon which one can rely necessitates retaining an attorney who is qualified in this particular area of the law.
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