#188 Should You Invest In Syndications Using An LLC? ft. Peter Kim, MD
In this episode, Dr. Peter Kim explores the numerous benefits associated with investing in syndications through a Limited Liability Company (LLC). Gain valuable insights into how this approach can safeguard your investments, simplify estate planning, and offer additional advantages that are crucial as an investor.
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Episode Highlights
Now, let’s look at what we discussed in this episode:
- Do investors need an LLC?
- Why are people investing in LLCs?
- LLCs for Additional Asset Protection
- LLCs for Estate Planning
- LLCs for Passive Investments
Here’s a breakdown of how this episode unfolds.
Episode Breakdown
Do investors need an LLC?
Peter opens by discussing the use of Limited Liability Companies (LLCs) for investing in real estate syndications and funds.
As an experienced investor, Peter shares insights on the pros and cons of using LLCs for investments, highlighting the potential benefits in terms of taxes and liability protection. Although he acknowledges that investing in your personal name is the easiest option, he expresses that there are some advantages worthy to consider.
“When I first started, I just invested personally, that was the easiest way to do it. But when talking to more experienced investors, I found a lot of them were using LLC entities to invest in these types of investments.” — Peter Kim, MD.
Why are people investing in LLCs?
Dr. Peter continues by explaining why some investors have LLCs, looking into probable reasons it can prove to be an advantage. He found out that investing in LLCs does not offer much tax benefit compared to investing as an individual, as the tax returns usually flow through to the individual.
However, LLCs do provide personal liability protection for investors, creating a barrier between the investment and personal assets. This safeguards personal assets and other investments from being affected by any issues within the LLC.
“It [LLCs] safeguards your personal assets, but also other investments that you might have. Meaning that each of these investments are walled off on their own.” — Peter Kim, MD.
LLCs for Additional Asset Protection
Peter adds how investing using an LLC can provide additional asset protection, especially for high-net-worth individuals who want to maintain privacy and protect their assets from potential lawsuits.
He shares that holding assets under an LLC can offer anonymity and make it harder for creditors to access those assets. Also, when using an LLC for estate planning purposes, one can streamline the process and ensure a smooth transfer of assets to beneficiaries.
While there is a cost and paperwork involved in setting up an LLC, it can provide long-term benefits in terms of asset protection and estate planning.
“As a high net worth individual, you don’t want people knowing much about what you’re investing in and what your assets are. We know as healthcare professionals that oftentimes were targets.” — Peter Kim, MD.
LLCs for Estate Planning
Dr. Kim shares his own use of LLCs, one of which is for estate planning. He mentions that investing through an LLC can streamline the estate planning process by avoiding probate court and simplifying the transfer of assets to beneficiaries.
By placing the LLC within a trust, all investments can be transferred to the trust at once, making it a straightforward and efficient process. He notes that despite the initial hurdles you get when establishing an LLC, it offers long-term benefits in terms of estate planning and asset transfer.
“It’s not as hard as you think [LLC]. Once you set it up, you are good to go, it makes it super simple and easy process moving forward.” — Peter Kim, MD.
LLCs for Passive Investments
Peter concludes by sharing how he uses separate LLCs for passive and active investments, especially for real estate properties, to provide protection for each investment.
He mentions the use of a holding company or LLC to umbrella all his passive investments, syndication funds, and angel investments. He then went on to ask about how others have set up their asset protection and estate planning strategies for investments, emphasizing the importance of having a strategy in place for tidiness and clarity in managing investments.
“Do you have any sort of asset protection strategy or estate planning strategy when it comes to these investments? If you don’t, it’s about time to start thinking about one.” — Peter Kim, MD.
