Why DSTs Are Better Than LLCs Hint
If you’re an investor learning about asset protection, it’s easy to get mixed up or receive poor advice. It’s even easier to fall into canada goose outlet ontario the logical trap of believing there’s a generic “best course” for all people.
After all, more than a few companies are all too happy to take your cash for a generic LLC, imply it’s all you need, “forget” to mention their products don’t include essentials like operating agreements or state filing fees, and toss you into the deep end of figuring out how to use the darn thing on your lonesome. Because once you’ve hit “pay” and received your docs, their work is done. They’re not your lawyers.
I am, however, a lawyer who’d like to take some time to clear up the confusion for my fellow canada goose jacket uk investors here on BiggerPockets. The first thing you need to canada goose repair uk know is canada goose outlet jackets simple. Unlike a fly winter scarf, asset protection is not one size cheap canada goose fits all at least if you’re doing it right.
One of the very first things to consider when developing your asset protection plan is where you live and hold property. If the word “California” appears in your answers, listen up!
This is the most essential information you need to know about the ideal structure for California residents: the Delaware Statutory Trust.
Why an LLC Might Not Be the Best Choice
Wait aren’t you the guy who canada goose outlet edmonton recommends Series LLCs for asset protection?
Yeah, that’s me. The Series LLC is an awesome structure for most investors. (Notice I said “most.”)
A critical point to understand about asset protection is that there is no silver bullet that works for everyone. An adequate asset protection plan is tailored to the https://www.dvu-nds.de individual, like a fine canada goose outlet toronto store suit. The more your lawyer knows about you, the more tailored your asset protection plan can be.
When you work with a real asset protection attorney, we’re essentially doing the legal variant of crafting you an Armani quality suit that’ll hold up so nicely you can be buried in it looking brand new. This is the strategy that defends your wealth, after all. It needs to stand the test of time.
For the California canada goose outlet locations in toronto investor, though, we do know the starting point is different. canada goose outlet michigan Rather than isolating assets canada goose outlet belgium into LLCs or series within a Series LLC, canada goose jacket outlet we tend to recommend the California investor use a Delaware Statutory Trust (DST) instead.
In fact, understanding the Series LLC is a great starting point for understanding DSTs. Both use a parent child structure and have infinite scalability, offering creative solutions for investors.
California investors have special concerns because of the state’s laws and tax regulations. While a Series LLC presents an ideal solution for investors in every other state, it would incur an $800 franchise tax at the very least.
The Delaware Statutory Trust is a great alternative, because it offers a similar level of protection to the cheap canada goose Series LLC while also avoiding this tax burden. The state views DSTs as estate planning tools, which do not have to meet the same requirements as corporations or LLCs. Any investor who is doing business in California may be subject to state taxes.
Related: Estate Planning for Investors: Insight From a Real Estate Attorney
How a DST Can Benefit Investors WhoDon’tLive in California
Let’s say you invest in California, but don’t reside there. Can you use a DST?
That’s right! You might have never set foot in California, but if you have property there even with partners you’re still going to have to play by California’s rules. Check with an attorney if you are in a partnership or have interest in an LLC operating in the state.
Related: 3 Benefits of Holding Your Properties in an LLC
What is a DST Anyway?
At its most basic, the DST is the intellectual grandfather of the Series LLC. It uses a parent child structure. I highly suggest you check out this previous Series LLC article for a more elaborate breakdown of this structure type and its asset protection implications. The same information is true of the DST (and I’ll be here when you get back!).
The DST is a type of trust canada goose retailers uk that was among the first business structures created buy canada goose uk for asset protection purposes. Unlike a company, you have a trustee managing investments and a beneficiary (you), who receives the profits of properties held in the trust.
Like the Series LLC, it uses a parent company and many Series as asset holding companies, sharing the liability limitation benefits. It’s an attractive alternative for Californians, because you receive the same benefits of Series LLCs (anonymity, streamlined business, tax flexibility) while escaping the requirements other companies must meet.
DSTs were designed to be low maintenance. No meetings or minutes are required, and compliance is canada goose black friday discount fairly straightforward.
The DST’s structure separates your assets from you and one another. This concept is called compartmentalization and has two key purposes: making your assets harder to pursue at canada goose outlet in vancouver all and controlling the damage if one canada goose coats uk is successfully threatened and seized.
What happens to one Series need not affect the other Series or the assets within them. Of course, the above assumes a properly formed DST, created with the aid of an experienced attorney.
Lawsuits are no joke, and you want the structure that’s best for you. If you’re in California, there’s no question that you should look into the DST, particularly if you plan to own multiple properties.
Disclaimer: This article does not constitute legal advice. We recommend you seek the counsel of an attorney familiar with your specific situation and market to ensure you make the best decisions within your real estate business.