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ScottyMacESQ
ScottyMacESQ, Lawyer
Category: Real Estate Law
Satisfied Customers: 16219
Experience:  Licensed General Practice Attorney, Texas
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We have an Idaho LLC that we used several years ago to flip

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We have an Idaho LLC that we used several years ago to flip a number of properties. Though there has been no activity in the LLC for several years, I have submitted the annual filing to keep it active. We would now like to use this LLC for a new multifamily property.

We were recently told by an attorney at a real estate club meeting that in the event an LLC is sued, and a monetary judgment issued, the PAST profits of the LLC can be at risk. Sounds quirky and unfair, but not unbelievable.

We don't want to begin using this past LLC if it's (significant) past profits are at risk.

True, or urban legend?

Brian

ScottyMacESQ :

Thank you for using JustAnswer. I am researching your issue and will respond shortly.

ScottyMacESQ :

That's somewhat true, but only insofar as the profits have been kept in the business (not distributed to members) OR the cause of action that you're sued on arose before the profits were distributed. So if the profits are still in the business, or the cause of action arose before those profits were distributed, those profits could be at risk. But if a cause of action arises after profits are distributed, then those profits would not be at risk.

ScottyMacESQ :

Hope that clears things up a bit. If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX luck to you!

Customer:

I think I understand, but a follow-up question to clarify: suppose that the profits from past activity in the LLC have long ago been distributed. Now I use the same LLC name for a new multifamily, and create new profits in the business.

Customer:

If I am then sued for an action involving one of the past properties (we did some inadequate wiring in a building a decade ago), are the new profits from the new multifamily then at risk?

ScottyMacESQ :

Yes.

Customer:

Got it. Thanks very much.

ScottyMacESQ :

The reverse would not be true (in that past profits distributed would not be recoverable)

ScottyMacESQ :

But new profits could be.

ScottyMacESQ :

My pleasure.If you have any other questions, please let me know. If not, and you have not yet, please rate my answer AND press the "submit" button, if applicable. Please note that I don't get any credit for my answer unless and until you rate it a 3, 4, 5 (good or better). Thank you, XXXXX XXXXX good luck to you!

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