Best state to incorporate in?

Question

Hello everyone,
  So I will be beginning the process of setting up an LLC to transfer my first property into which I will be purchasing shortly.  I was wondering (and I know that I need to speak to an attorney and an accountant) what is the best state to incorporate in for Real Estate?

You always hear about how Delaware has the best tax laws for corporations, and how each and every state has some different rules and regulations that govern corporations... so... whats the best one?  Does it matter? Should I just stick with the State I live in?  Should I stick with the state my investment is in? (I live on the border of my state)

Educate me!!  :groovy:

Alex W · Answer

Ned, are you talking about CA or all states? As far as my entities are concerned, I still have all the advanatges of the WY entity (ie. privacy, asset protection, tax savings, etc.) since the WY entity is the owner of all the LLCs that hold my properties which are setup where the properties are located. I have a CA S corp which manages all the holdings of the "main" WY LLC. I save on franchise taxes since the entities are out of CA, and the S Corp is only subject to self employment/FICA tax.

In this scenario, when someone sues in one of the properties, the owner of the LLC holding the property is the WY LLC, which has strong asset protection laws and privacy is still in place. Plus the WY LLC is already the secondary layer beyond the actual LLC holding the property. My S Corp is totally separate from any of the LLCs and only manages them.

The reason I went with Wyoming is due to cost. I could have done the same thing in NV.

Bottom line: having the CA S corp as manager does not require me to register the NV or WY entity in my home state, which in turn does not take away the benefits of incorporating there. It's not doing business in my home state.

I would also like to make sure people know I am not an attorney and my post is only based on my own personal experience. Please consult qualified professionals. This is not a one size fits all solution.

Ned Carey · Answer

The issue is the advatages of a Nevada corporation ie: privacy, are negated by registering in your own state. So why spend the money to form and run the Nevada corp.?

Alex W · Answer

Very interesting... Care to elaborate on this? I'm curious why all this incorporatng in NV is garbage.

I'm trying to put together some entities and would like to get more feedback on why this is so. I'm a resident of CA and based on my understanding there are advantages incorporating in NV, WY or Delaware. I have rental properties in different states and have applied different entity structuring for asset protection and tax strategies.

As most of you know majority of publicly traded corporations and Fortune 500 companies are incorporated in Delaware due to it's asset protection and tax friendly laws. NV and Wyoming laws are similar to Delaware's. So if these companies do this, how come you say incorporating in NV or any similar state is garbage? What am I missing?

I've been involved in several hi-tech start ups here in the Bay Area and have friends who are VC's and Angel investors, and majority have set up shop in the states I mentioned for the reasons above. Regardless if it's technology, real estate, manufacturing, etc.

Please elaborate on this as I want to know if I've been wasting my money incorporating in other states.

Thanks,
Alex

Jason Hanson · Answer

First, I am not a lawyer, so you should certainly talk to one. However, every lawyer I have spoken with says to incorporate in your own state.

All of that info about Nevada LLC's is just garbage and someone trying to make money off of you.

Bob McIntosh · Answer

Well I have been reading about a Nevada corporation with a foreign registration in the state in which I am holding the properties.  There are several advantages I have seen to incorporating their for asset protection.

Any thoughts?

Account Closed · Answer

Most states now require that you file to do business in their state if you are doing business there, so the point here is moot.

Check the laws of the state you plan to do business in (own properties in) that would be the first thing I would do.