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Originally Posted by Eric Coffey
If structured and maintained properly, an LLC can protect your additional assets outside of the LLC if someone wants to come after you. So, you would want to form one for each rental property, or at least limit the assets in each. It doesn't take much to "pierce the corporate veil" though, so you need to do your homework, and make sure that you set it up properly AND maintain/run it properly.
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Absolutely it is necessary to keep your personal and business assets distinctly separated to keep the liability protection (the veil) in place. My attorney suggested putting all of our personal assets into a trust as a means of further separating them from the business activities.
Just as an example that I was given regarding piercing the corporate veil:
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You live close to the property. Let's say you take your riding mower down to the rental house and mow the lawn. While doing this, a rock flies out of the mower deck and pokes your tenant's eye out. Well, you were doing this work with your personal mower (as opposed to your business mower) and now they can come after your personal assets. Personal is personal, business is business, and never ever mix the two.
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I don't know if this example stands up to an attorney's scrutiny, but it sounds like something that would happen in our litigious society.