If an LLC owns the rental house, the tenant gets drunk and falls off the porch and decides it's your fault and sues you, they have to sue the owner of the house, which is the LLC.

If an LLC owns the rental house, the tenant gets drunk and falls off the porch and decides it's your fault and sues you, they have to sue the owner of the house, which is the LLC. And if they were to win, they can take what that LLC owns, but nothing else. That was good. Now let's go a little deeper. As an investor, you need to understand two threats that you face: inside liability and outside liability. Let me explain. Inside liability happens when something goes wrong inside of the property itself, like a tenant slips and falls or a subcontractor sues you for unpaid work. In that case, if there's a lawsuit, the LLC protects your personal asset, but the property inside the LLC is still exposed. And then there's outside liability. Car accident or a party in your backyard where someone falls, it's called outside liability because it happened outside of your LLC. In that case, the party injured may try to seize your ownership interest in your LLC and try to force the sale of your property. So how do you protect yourself from both threats? For inside liability, here are four things you can do. Make sure that each property is held in its own LLC. There are a few exceptions to that. No. 2, if you are managing the properties yourself, instead of managing the properties directly through the LLC that owns the property, consider forming a property management LLC. Number 3, make sure the properties are adequately insured, and for higher equity properties, consider umbrella insurance. Number 4, you can implement a holding company. Speaking of holding company, this brings me to outside liability. If you are personally sued by that car accident or that party that we talked about in your backyard, that injured party cannot easily access that property holding LLC if that property holding LLC is owned by a holding company, if that holding company is set up in a charging order protection state.