Location of LLC for Virtual Wholesaling?

Question

Hello all,

I'm a newby investor (1 deal completed!) trying to get my structure set up properly.

I'm currently located in Ohio and would like to establish my LLC here. But I would like to wholesale properties in other states. Is there anything that I need to be aware of by having my LLC established in Ohio and wholesaling properties in California, for example?

Thanks a lot!!

Jonathan Baker

Christian Carson · Answer

If you're doing business in California, you'll probably have to pay taxes in California. That state's franchise tax board is also notorious for seeking out people operating out-of-state LLCs in their state and making them register (as a foreign LLC), which invokes a minimum franchise tax of $800 per year. It's very prudent to comply strictly with California registration and tax requirements as the nonpayment penalties can be very high.

The standard for foreign entity registration of California can be found right on the Secretary of State's website - http://www.sos.ca.gov/business-programs/business-e... -

Before transacting intrastate business in California the business must first qualify/register with the California Secretary of State. (California Corporations Code section 2105, 15909.02, 16959 or 17708.02.) California Corporations Code sections 191, 15901.02(ai) and 17708.03 define "transacting intrastate "as entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce."

Just be careful if you're doing business in California.

Steven J. · Answer

I'd actually check out a Nevada Corp as you have a better corporate veil and the taxes should be less. Not sure about Ohio, but I'm on the ND and MN border. Had I set up in ND and did business in MN I'd get double taxed from both states. Luckily, I did it the other way around and won't be double taxed as badly.... Now, had I done a Nevada Corp I believe that I would only be taxed by NV - could be wrong about that though.

Check out your local Small Business Development Center and they can probably give you an idea of what might work. Try talking to CPAs and Attourneys to see what they say. And remember, if you don't set it up the right time right away its okay. I'm sure you'd regret things whether you set it up this way or that way.