LLC in-state vs. out of state

[Jim Chung]

hello,

After reading and a lot researching, i am finally ready to take the plunge. . iam in contract buying a duplex and 8 units in toledo, ohio area. i do have a partner going in with me. i have few questions about structuring entity.

1) i live in NY area. If I formed a LLC for my buildings, should i formed in ohio or NY area. Does it make a difference? i understand i still have to register the LLC to Ohio area in order to do business there

2) For my duplex, is it necessary to go under LLC? knowing that i may want to do 1031 in future, and was informed may be difficult 1031 exchange under LLC. Do you think using operation agreement will suffice for the duplex without LLC

This is exciting time for me and as always, thank you for your advice with my endeavor

Jim

[Dave Foster]

@Jim Chung and @Ken Teng,

As long as you are forming a single member LLC as a disregarded entity so it will not file it's own tax return then there is no issue with a 1031. In that event all activity of that LLC is reported on your Schedule E so the IRS views you as the taxpayer so you can sell as the LLC and buy as yourself.

If your LLC is filing it's own tax return then it is the actual tax payer for the property and you must both sell as the LLC and buy as the LLC. While not a problem in and of itself, this can create financing issues getting a lender to loan to the LLC.