Holding property inside an LLC from another state? + 1 question

2 Replies

Hey guys,

I was researching about how to hold my upcoming real estate purchase, and understood that a Wyoming LLC or LP will provide the best protection because of the charging order laws over there

My question is, can I buy say a property in Arizona, and hold it in a Wyoming entity? And what would be the benefit (if at all) holding the property in an Arizona entity that is then owned by a Wyoming entity (LLCs or LPs, doesn’t matter for this discussion)?

Also, I'm debating if I should use an LLC or an LP. I live in CA so I understood that LPs aren't subject to the $800 FTB yearly minimum. However, because they are considered completely passive (the limited partner of course) I would not be able to claim any depreciation (and I want to, I work in construction so my CPA said we can make a claim that I am a real estate professional and ideally offset off a lot of earned income). – any thoughts on this?

Thanks guys.

I would recommend speaking to a lawyer first.  You may find that some lawyers and the SBA counselors do not agree with what is taught by a lot of real estate gurus.  Some states will require that you register your business in that state even if you incorporated it in a different state.  You should check that.  Some states also will only give grants, subsidies etc to llcs or llps etc that are setup in their state.  If they see that you are set up in another state they will not give you anything eventhough the property you acquired is in their state. 

Hi Yahav, 

This is a fairly nuanced jurisdictional question so I recommend you consult an attorney. It depends what kind of liability you are trying to protect against. If your property in Arizona is vested in an entity, it doesn't matter where the entity is filed, you will be subject to Arizona law for cases arising out of that property. Concerning bottom up liability, keep in mind that you will have to domesticate a Wyoming entity to do business AZ. This means a creditor could seek charging order under AZ law. 

I don't have much experience with CA LPs. Sorry. 

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

Lock We hate spam just as much as you

Join the Largest Real Estate Investing Community

Basic membership is free, forever.