LLC in state of doing business

3 Replies

I've seen several answers to questions on these boards that an LLC should be formed in the state of doing business, but I haven't seen a clear explanation as to why. Can someone shed light on that for me? I'm in California looking to buy several properties in Ohio and potentially other states. Thanks.

Hi Rick,

I have always heard the opposite, that you can create a LLC in whatever state you want some states offer better protection and cheaper annual fees. Might want to consult a lawyer. There is a bigger pockets podcast covering this issue, it has some really good info. I believe it is episode 109

I am absolutely not a master of this subject. But with that being said, I have attended several courses and bought the late, great Al Aiello's systems. His reasoning was that you will have to pay out-of-state fees to do business in the state you are working in. Your main LLC should be based in the sate you are working in. You could have a 2% partner in you main LLC that is a Wyoming, New Mexico, or other protected state that would give you some tax benefits. But basically the way Al explained it to us laymen s was that when it comes down to it, if you have an issue, the governing state or county will be going after whoever is doing business in their state and will be going by their law, not those of where the llc is based.

I hope this helps. If it doesn't I will check back and quote my LLC handbook when I get back in town.

If you form the LLC in a different state than the investment then you'll have to also register the LLC in the investment state as a foreign entity. So I think you may end up with ongoing reporting and fee obligations in the state of incorporation (domestic) and the state of investment (foreign). I'd ask a successful OH real estate investor or RE attorney if it's really worth it.

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