The sun is almost setting in the window Lars is facing, at the meeting on asset protection ideas for Bernie. What a great time is fall, leaves and some blue sky, later daybreak for early Sunday walks at the beach. Football too, but the drama of too many important games wasn't doing it for Lars. Is he less of a guy now? Duncan moves on to the subject of entities as asset protection.
Duncan asks and Bernie tells him he has a mix of entities. He hasn't done any real estate development just in his own name. Good; that would bring full personal liability for all losses and claims. Much of the work was done in limited partnerships, with Bernie as general partner. Not much better for Bernie, says Duncan - a general partner has full liability. In more recent years Bernie used limited liability companies (LLCs). These are better - they can limit each participant's liability to his or her investment in the project. Except of course those who guarantee loans, but they are protected from other kinds of claims. And Duncan says now even a limited partnership in Washington can get LLC-like protection for all including the general partners, by electing limited liability limited partnership (LLLP) status.
Protection from an LLC or LLLP depends partly on whether its form is respected. Lars had already observed with other clients that the proper-operation-of-the-entity thing was a big deal. Mostly, have all assets and do all business and get insurance in the LLC's name. Pretty simple but seemingly hard for many to execute. Like the old Green Bay Packer offense (Lombardi era). There's the football thing again; maybe Lars has some manliness left.
Duncan clarifies that he has been talking about claims arising from the property. There is also the phenomenon of liabilities coming from elsewhere, say from another investment or accident. Say Bernie runs head-on into a carload of surgeons heading to seminar, and suffers a judgment in excess of his insurance. It would be harder for the plaintiffs to seize his LLCs than if he held the assets outright.
So basically, entities-R-good. Lars checks his watch. Another topic, another twelve minutes. Clockwork, Duncan baby!