Should Each of Your Self-Storage Facilities Be Its Own LLC?

Should Each of Your Self-Storage Facilities Be Its Own LLC?

If you're investing in or developing multiple self-storage facilities, you’ve likely faced this question: Should each property be in its own LLC, or should they all fall under one umbrella LLC? There’s no one-size-fits-all answer—but there are significant advantages and disadvantages to each approach. Whether you're just getting started or you already have a portfolio, this decision touches nearly every part of your operation—from taxes and insurance to legal protection and even marketing. Let’s take a closer look.

Separate LLCs for Each Facility: The Pros and Cons

Advantages:

• Liability Protection: This is the most commonly cited reason investors use separate LLCs. If a claim, lawsuit, or liability arises at one location, isolating it in its own LLC may protect your other properties from being affected. It's a strategic form of risk containment.
• Easier Buy/Sell Transactions: If you want to sell one facility but retain others, it's typically much easier when the facility is already its own legal entity. Clean books, clear ownership, and separate operating agreements make due diligence easier for buyers.
• Custom Partnerships: If you're working with different partners or equity structures on each deal, having separate LLCs can simplify ownership and control negotiations. Each facility can reflect its unique investor structure.
• Insurance Clarity: Some insurance providers prefer or require separate LLCs per property, especially when the properties are in different states or carry differing risk profiles.

Disadvantages:

• Administrative Overhead: More LLCs mean more annual filings, more registered agents, more bank accounts, and potentially more accounting costs. If you have five facilities, you’re multiplying your paperwork fivefold.
• Tax Complexity: Multiple LLCs can mean multiple state filings and potentially more complex tax reporting, particularly if each LLC is taxed as a separate partnership or entity.
• Financing Confusion: Lenders sometimes want a cross-collateralized structure or consolidated financials. Too many separate LLCs can create additional documentation burdens or may not align with how your financing is structured.

One LLC for All Facilities: The Pros and Cons

Advantages:

• Simplicity: One LLC = one set of books, one tax return, one operating agreement. This is attractive from an administrative and cost-saving perspective, especially for smaller portfolios.
• Unified Branding & Marketing: When all properties are under one LLC, it may be easier to build brand cohesion. Customers recognize the name across regions, and you can streamline advertising, websites, and SEO efforts under a single brand entity.
• Easier Cash Flow Management: Funds can be used more fluidly across locations if needed—assuming all the properties have shared ownership and financing terms. This can be helpful for smoothing out revenue inconsistencies across seasons or markets.

Disadvantages:

• Increased Liability Exposure: A lawsuit at one facility can potentially impact all the assets under the LLC. One claim could threaten the equity you’ve built in other locations. This risk grows with every additional facility you operate.
• Sale Complications: Selling a single property under a joint LLC can be messy. You'll need to carefully allocate gains, liabilities, and operational transitions, which might involve restructuring the LLC entirely or carving out complex side agreements.
• Challenging Partnership Structures: If you're working with different partners across facilities, a shared LLC can lead to governance conflicts or ownership disputes unless you've done detailed tiered structuring within the entity.

Additional Factors to Consider

Taxes

You’ll want to consider if your LLCs are taxed as disregarded entities, partnerships, or S-corps. Separate LLCs can allow for more flexibility, but also mean more filings. A single LLC may simplify accounting, but can limit tax strategy customization.

Insurance

Speak to your broker. Insurers may offer portfolio policies that cover multiple properties, or you may get better rates by insuring each under its own LLC. They may also have different views on risk bundling vs. separation.

Legal Claims

The biggest “what if” question in this decision: What happens when something goes wrong? If one customer slips and falls, if a fire damages units, or if a flood triggers multiple lawsuits, will one LLC's exposure drag your entire portfolio into court?

Marketing & Branding

Operating under one LLC might simplify your digital marketing and SEO strategy—but you can still brand facilities under the same name even with separate LLCs. For example, “Blue Ridge Storage – Facility A” and “Blue Ridge Storage – Facility B” could be two separate LLCs with shared branding, managed by a third-party company or management LLC.

Financing

Lenders may want specific structures. Some may even require a "bankruptcy remote" entity, especially for CMBS or institutional loans. Others may prefer a master LLC with DBAs. Always align your legal structure with your financing strategy.

Final Thoughts: Choose With Purpose

There’s no perfect answer. What matters most is that your structure matches your growth goals, risk tolerance, and operational complexity. What worked for your first location may not work by the time you reach your fifth.

And above all: Consult a top-tier CPA and real estate attorney who understands self-storage. They’ll help you tailor your structure to your portfolio’s needs, your long-term vision, and your financing strategy.

This article is for informational purposes only and does not constitute legal or financial advice. Always consult a qualified attorney and certified public accountant (CPA) before forming business entities or making tax-related decisions.