Registering a foreign LLC in Massachusetts

[Moshe H.]

Hi all, I'm in contract on an investment property in western Massachusetts and I'm wrestling with the (beat-to-death on these forums) LLC dilemma. Assuming my partner and I do want to hold the property in an LLC, the question becomes - can I get out of the MA $500/year fee. (Yes, I know some will say that's just the cost of business and I understand that, but this is a small deal, and my first investment property, and I wasn't anticipating such a high fee.) 

I can incorporate an LLC in any state, I guess, but if I want to register the foreign LLC in MA it costs the same $500/year. So what would the implications be to hold the property in an LLC that is not registered for business in MA? My first question would be if it's legal, the second if it's advisable. My closing attorney advised me that there could be an issue if a lawsuit comes up because the LLC would not have standing in a Massachusetts court. But I don't think he's an expert in this area of law. Any attorneys willing to chime in would be very appreciated!

[Jessica Zolotorofe]

Nothing to do with standing. Totally separate issue. The problem is, as others mentioned, that if you derive income from MA you have to pay taxes to MA, whether as an individual or an LLC. There's no way around it. Trying to avoid a $500 annual filing fee in exchange for losing all asset protection seems silly to me, but it's a business decision. You have to do a risk benefit analysis with your partner and decide what works best for you, but operating a NY LLC in MA without registering to do business there is not the route to take.