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Question:
“In your best state to form an LLC article, you mentioned that for real estate investments, it makes more sense to register your LLC in the state where your investment property is located in. However, won’t you still need to register your LLC as a Foreign LLC in your home state? If so, how is a real estate investment related LLC different from any other LLC where you say registering at your local state is cheaper? Thank you.”
Answer:
Unless you’re in California, most people don’t need to register their LLC as a foreign LLC in their local state, aka, their home state.
You’ll just form a domestic LLC in the state where the property is located.
It comes down to where you’re “doing business“. For real estate LLCs, the state where they are doing business is that state where the property is located.
The exception to the rule is California, where they have extremely strict rules about the definition of “doing business”. If you reside in California, you can form an LLC in California and register it as a foreign LLC in the property state, form an LLC in the property state and register it as a foreign LLC in California, or form an LLC in California (domestic) and an LLC in the property state (also domestic), however the California LLC owns the property state LLC.
And for those who are reading who want to buy real estate in their home state, then you don’t have to worry about all this. It’s just one LLC formed in your home state.
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
Thank you !! Living in California, rental properties in Florida ( 10 properties)and Missouri( 6 properties)still have morgages. ,looking into setting up LLC.what way is the most beneficial
According to your article thinking 2 separate LLC in each states if I understand correctly.
Please refer me to company in each state wher our property located.
Sincerely ,
Stephanie
Hi Matt,
California resident, with property in Mom utilizing property management. Looking to move it into an LLC and stay anonymous. Considering one of the following, but looking to understand the implications: 1) open LLC in MO using registered agent there — would I need to register the MO based LLC in CA as a foreign LLC or just declare the income for state tax purposes — would I be subject to the $800 annual CA Franchise fee, or is that just for Corporations/S Corporations? 2) Open LLC in Wyoming, register as a foreign LLC in MO or 3) Register a Hold Co in Wyoming, and a domestic LLC in MO that I place into the Wyoming hold co. Just trying to understand the cost vs benefits and tax implications since I do reside in California. Thanks!
Just noticed the auto correct — first line was meant to say “California resident, with property in MO” (Missouri).
I own a rental property in FL, I own 50% and my sister owns 50%. I live in GA and my sister lives in IL. I take care of all the finances. Can/should I establish the LLC in GA so I can be the agent and simpler LLC annual requirements. Do I also need to set up a bank account for the LLC for expenses and rental income.
Hi Steve, for investment real estate, it’s best to form the LLC in the state where the property is located. This is because the LLC is “transacting business” there. So you could form an LLC in Florida and make it owned 50/50 by you and your sister. And then you’d need to deed the property into the name of your LLC. And yes, you should set up a business bank account for the LLC. Hope that helps.
Is it safe to create llc in same state as the property is located for buying? Any benefits of being same ? Or can this be out of llc and any disadvantage of being out of state
Hi Kumar, yes, it’s safe – and most common – to create the LLC in the state where the property is located. If you formed an LLC out of state, you’ll mostly likely need to register the out of state LLC as a Foreign LLC in the state where the property is located.
Hi Matt,
I own 2 rental properties in Alabama and 2 rental properties in Washington state.
I live in Washington state as well. I was thinking that I should create 2 LLC’s (one in Alabama and one in Washington state) and put in appropriate properties in each. Is this the correct action for covering all properties? Please advise if this action has any potential flaws…
Thanks,
Jeff
Hello & Happy healthy & successful 2023 Mr Horwitz.
Do you provide services to set up LLCs.
Thank you
G.
Hi Genna, thank you so much! At this time, we don’t provide LLC formation services. We have free LLC guides on our website for if you want to form your LLC and we have recommendations for if you want to hire a company to form your LLC.
Living in California, rental properties in Florida ( 10 properties)and Missouri( 6 properties)still have morgages. ,looking into setting up LLC.what way is the most beneficial
According to your article thinking 2 separate LLC in each states if I understand correctly.
Please refer me to company in each state wher our property located.
Sincerely ,
Stephanie
Great information. I live in CA and opened an LLC in Wyoming and have no plans on getting property in the CA- trying to avoid that CA tax. Currently looking at Georgia, Alabama, and Texas.
It looks like I’ll have to register my LLC in California too. Is this correct? Trying to avoid paying CA taxes but it doesn’t look like I can avoid it.
Thank you in advance.
-DJ
Hi DJ, if you live in CA, there’s no legal way of avoid CA taxes.
Hi, Great website and full of useful information.
I have a few rentals, some paid in full other with a mortgage. I been thinking on opening a LLC per property for years… and now I’m not waiting any more… I opened 2 last night following your step by step instructions… very helpful.
I live in Kansas City KS. My CPA said that I should open ALL LLCs on the Missouri side to avid the higher filling fee and annual report (none in MO). One of your articles suggested that the LLC should be open in the same state where the property is located. Please advise.
The LLCs will be a single member LLCs. I filed taxed on KS and MO.
The LLCs will only own the property, not sure if Im going to open a Bank account per LLC. I already have an LLC in KS that has a Business checking account and all tenants deposit their rent in it, this LLC has no other assets.
Thank you in advance… please advise.
I formed an llc in Idaho. The purpose of the llc is for liability protection on a residential rental property i own in state. I live in Alaska, and want to open a business bank acct for my new Idaho LLC at my local Alaska bank. The bank requires a business license from Idaho. I am not required to have a business license for this situation, either by the state of Idaho, or from the city or county. I can’t even get one if I wanted to. What do I tell my banker who insists I have one before he’ll open a business acct?
Hi Michael, this happens often. Bankers aren’t usually super knowledgable about LLCs. You can tell them that unlike Alaska, Idaho doesn’t have a statewide business license requirement for LLCs. No such thing exists. Additionally, I’d ask to speak the branch manager to see if you can straighten things out. If you still get push back, the only other option is to go to another bank. Good idea to call around ahead of time to make sure they can open an account for an Idaho LLC. Hope that helps.