November 2025

For many investors, creating an LLC feels like the automatic first step after acquiring property. It sounds simple: form an entity, shield personal assets, and enjoy peace of mind. But after years of helping clients structure their portfolios, I’ve learned that while LLCs can protect you, they can also create unintended risk if used without strategy.

I once represented a client who transferred a multi-unit building into a newly formed LLC the week after closing. The intent was smart — asset protection — but the execution caused problems. The property’s loan included a “due-on-transfer” clause that required lender consent for any title change. The client didn’t realize the transfer technically triggered a default. It took weeks of negotiations and legal fees to restore the loan to good standing.

That story highlights a common theme: forming an LLC is easy; forming the right LLC for the right reason is not.

LLCs work best when they fit within a coordinated plan. They can:
–Isolate liabilities among multiple properties, preventing one issue from — contaminating others.
–Provide privacy of ownership.
–Simplify joint-venture arrangements and clarify management rights.

But they can also:
–Complicate financing — some lenders charge higher rates or require personal guarantees.
–Trigger transfer taxes or property-tax reassessment in certain jurisdictions.
–Create administrative burdens when not properly maintained.

Too often, investors chase “protection” without defining what they’re protecting from. If your biggest exposure is tenant injury, insurance may offer more cost-effective coverage than entity restructuring. If your concern is estate planning, a trust or family-partnership model might achieve smoother succession than multiple single-member LLCs.

The lesson isn’t that LLCs are overrated — it’s that they’re misunderstood. Used thoughtfully, they provide tremendous flexibility and protection. Used reflexively, they can generate complexity that outpaces benefit.

Before you transfer or acquire property through an entity, ask three questions:

What’s my real goal — liability protection, tax efficiency, or succession?
How will this structure affect financing, insurance, and management?
Have my attorney, CPA, and financial advisor reviewed it together?
When those answers align, the entity becomes a tool for strategy rather than fear.

The smartest investors I work with view legal structure as part of their business model — not a box to check after closing. They understand that the way you own property can be just as valuable as the property itself.

For more information contact Jeff Love

310-734-3352

jlove@gibbsgiden.com

Jeff Love is a partner with the firm. His practice encompasses all facets of real estate transactions, including drafting and negotiating purchase, sale, syndication, and financing transactions in connection with commercial, industrial, and residential assets. He also regularly drafts and negotiates office, retail, and industrial leases for regional landlords and tenants throughout the West Coast. Mr. Love has extensive experience drafting, negotiating, and reviewing real estate loan documents, including originations, modifications, note purchase agreements and other finance-related transactions from structuring through loan closing. He is a licensed real estate broker in the State of California.

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