Imagine owning a condo and a duplex. If you personally own these two properties, you will be personally liable for any obligations and liabilities related to these properties. And all of your non-exempt assets, including the condo, duplex, and your personal assets will be at risk.
If a traditional LLC is used to buy the condo and the duplex, you will be insulated from personal liability. But, both the condo and the duplex will still be exposed to the liabilities of the other.
In this case, you can create a parent LLC by filing a certificate of formation with special language authorizing the creation of one or more subsidiary LLCs. Then, you can go on to create two subsidiary LLCs that are owned by the parent LLC––one to purchase the condo and one to purchase the duplex.
Afterward, if someone sues you as a result of being injured in the duplex, only the LLC that owns the duplex will be liable and at risk. The parent LLC and the LLC that owns the condo, as well as, your personal assets will be insulated from the liabilities associated with the duplex.
This level of protection can only be achieved by utilizing a series LLC or by forming multiple LLCs. But, due to the cost and inefficiencies involved in setting up a separate LLC for each property you own, a series LLC would be a better solution.
