Protecting Real Estate and Rentals in Oklahoma: LLC and Trust Strategies That Reduce Lawsuit Exposure
Owning rental or investment properties in Oklahoma is a powerful wealth-building strategy, but it does come with legal risk. Tenant or visitor injuries, premises defects, disputes with contractors, and third-party claims can quickly turn a property into a huge financial liability. Insurance is not enough on its own. Many owners look into different ways to structure their property legally to protect themselves. Depending on your needs, you may need to talk to a trust administration or business formation lawyer.
The team at Entz Burton & Associates helps Oklahoma residents like you build their wealth through careful planning. Attorney Jeffrey Burton has spent more than a decade building his reputation as an estate planning, SSDI, and business formation lawyer. Call our business formation law firm at 800-633-7230 to set up a time to discuss your needs with our team.
Lawsuit Exposure for Oklahoma Rental and Investment Properties
Oklahoma property owners face potential liability from a variety of scenarios. A visitor or tenant may have a slip-and-fall injury, a tenant’s dog may bite a delivery person, or a vendor may have a claim against the property. When you own property in your own name, a lawsuit tied to an incident on that property can put your personal assets at risk.
This is especially important for owners with multiple rentals. You could have an entire portfolio of rental properties, only for one major injury or incident to completely wipe out equity across all of them.
How LLCs Can Isolate Liability
A limited liability company is an effective way to compartmentalize your risk. If you structure your LLC properly with the help of a business formation attorney, it can limit claims arising from one property to assets owned only by that LLC—not all of the properties you own.
There are several different ways you may structure your businesses to protect yourself from risk. Some owners opt to put each property into its own LLC, while others group multiple properties together. Single-property LLCs limit your risk the most but also require the most upkeep; multi-property LLCs are easier to manage but do increase your risk.
Note that LLCs are not bulletproof. They do not shield owners from claims arising from personal negligence or fraudulent conduct. In litigation, attorneys may also use a variety of strategies to pierce the veil of an LLC.
In Oklahoma, business owners must register their business with the Oklahoma Secretary of State. You also have to pay an annual fee to keep your registration active and in good standing.
Where Trusts Fit Into Your Planning
If working with a business formation lawyer does not fully protect your personal assets, you may want to turn to one who can help you establish a trust. Revocable trusts are helpful when it comes to estate planning, but they do not offer much protection from lawsuits. Irrevocable trusts offer stronger protection by removing assets from your ownership and control. However, this structure requires careful planning, as properties cannot just be pulled from an irrevocable trust after ownership is transferred.
Combining LLCs and Trusts for Layered Protection
A layered approach can help Oklahoma property owners protect themselves as much as possible. An LLC may own properties, while a trust then owns the LLC membership interests. This approach reduces exposure and gives owners more privacy. This process must be followed carefully to ensure that properties are transferred correctly, lenders receive proper notification, and insurance policies are appropriate for the situation.
What LLCs and Trusts Can’t Do
No matter how careful you are about how you structure your property ownership, know that no structure eliminates all risk. Owning property comes with some inherent risk, and there will always be some degree of personal exposure. Legal structures reduce risk, but as a property owner, you must still keep properties up to code, operate legally and above board at all times, and avoid acting negligently.
Protect Your Personal Assets With an Oklahoma Business Formation Law Firm
If you’re ready to protect your personal assets as you build your real estate portfolio, it’s time to talk to our business formation law firm, Entz Burton & Associates. Give us a call at 800-633-7230 or get in touch online now.
Attorney J. Michael Entz at Entz Burton & Associates is an experience lawyer in estate planning law, business formation and asset protection serving the families in Oklahoma City and Weatherford office.
