What State Should I Create My LLC?

[Jeremy Schneider]

I will be completing a 1031 exchange in the next couple of months. Selling prop in Washington and buying in Montana. My current property is titled to my wife and me as a married couple. We want to title the new prop in an LLC. Since I live in WA but the new prop is in MT, what state should I file/create my LLC?

[Dave Foster]

@Mike S., as long as @Jeremy Schneider and his wife set up a single member LLC that chooses to be taxed as a sole proprietor the activities of the property will still be reported on their personal joint tax return. In that event the IRS does not perceive that the tax payer has changed. The tax payer is still them (or more accurately their tax return). That would allow them to sell as themselves and buy as a "disregarded" LLC. This is used quite often when crossing state borders in a 1031 as many state require either an LLC in their state or at least an LLC that is domesticated to that state. Jeremy, you'll want to get some extra eyes on your transaction, especially the transition to a new lLC as WA is still one of the hold out community property states I believe. And that will have some special considerations.