I am looking to begin virtual wholesaling properties in FL. My question is: would it be wise to form an LLC in a more tax-friendly state, such as Delaware or Nevada? If I live in NY, but I do not intend to do any business in NY, would I need to have my out of state LLC filed as a foreign LLC in NY?
Essentially, I am looking to form an LLC in Delaware, do wholesale deals in FL, all while residing in NY. I understand I would need to create a foreign election of the Delaware LLC in Florida, but I'm not sure about NY. Any recommendations on this, or what to stay away from, is greatly appreciated. Thank you.
If you are wholesaling, you wouldn't need an LLC.
@Simon W. Thanks for the reply. While it isn’t necessary to have one, I’ve heard from most accountants it is wise to have one, at least after your first couple of deals. So, I’d rather get one set to be somewhat protected from that “corporate veil”.
States being what they are, I'm sure you'll pay the appropriate taxes where you make the income at.
Don't think being a foreign corporation gets you anything on taxes.
@Steve Morris thank you for your feedback. Why are many LLC's formed in Delaware, Texas and Nevada? Is it for other reasons beyond taxes?
Why are many LLC's formed in Delaware, Texas and Nevada?
I think mostly easier disclosure rules and better protection from lawsuits.
@Steve Morris Understood, thank you.
Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.
Forming an entity outside your home state does not help much with taxes. For example, if you are wholesaling in FL but doing it from NY, you're still doing business in NY since that's where your office is. If you create a FL LLC, then it will need to register in NY as a foreign entity. The reverse is also true - if you're a NY LLC operating in FL, you'll be a foreign LLC in FL. If you create a DE LLC, then you'll need register it in DE, NY, and FL. That's a lot of additional fees.
@Sean Morrison Thank you for your input, much appreciated.
I’m looking to do the same thing. Virtual wholesaling in other states. I’m located in Illinois. So, for instance, if I virtual wholesale homes in Georgia while here in Illinois, I would have to get a Foreign Qualification in Georgia?
I'm about to throw a wrench into this virtual wholesaling and LLC debate. Simon W. said you don't need an LLC. I agree and disagree.
If it were me, I wouldn't even think about an LLC for quite a while. I would be far more concerned about trying to wholesale in Florida from NY. Virtual wholesaling is difficult. Far more difficult than people think. First off, it's difficult to wholesale in New York and I give you that. But wholesaling in another state require boots on the ground. It requires solid boots on the ground. Someone who can take pictures of the properties, someone who can give you an honest evaluation of the property. How much work does it need? Is it in a good area? How much are the rents? What's the neighborhood like? Some people might tell you that you can lookup the neighborhood and that's true. You can also look up the rents. But having someone there, that knows the market, is invaluable. Having a solid realtor to assist you is also important. I could go on and on. My goal here, is to help you understand the difficulties in virtual wholesaling. Yeah, the "guru's" tell you anyone can wholesale virtually. The "guru's" will tell you anything and everything you want to hear. The reality of it, is that it's difficult. My suggestion would be that you don't worry about an LLC, until you have several deals under your belt. If you start selling 4 or 5 properties, then that's when I would start to worry about an LLC, but not until then. I hope this helps.
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