Hi all -- first time posting on this website. Please forgive me if this topic has already been addressed in another forum. I'm still figuring out how to navigate everything.
Background: I'm based in Los Angeles and looking to purchase commercial property (multi-units and/or plazas) in Las Vegas. This has brought two ponderous questions to mind that I'm hoping some of you have experience with:
1. Would it be better to establish a California LLC or a Nevada LLC when purchasing property in Las Vegas?
2. Would it be better to seek a lender in California or Nevada when purchasing property in Las Vegas?
Thanks in advance for any direction or advice you can give.
Nevada is usually one of the more sought after states due to sometimes higher protections for owners. Most people who set up an NV LLC aren't even located in NV or have their property in NV. Being that your property will be in NV, then it might make sense to set up a NV LLC. However, since you are a CA resident, your LLC will still be "doing business" in CA. You will have to file as a foreign LLC in CA and pay the $800 minimum tax. If you end up creating your LLC in California (likely a valid options as well), then you will need to register as a foreign LLC in Nevada. Nevada I believe is one of the states that has no income tax, but you may want to check to be sure you will not be subject to tax on the rental income earned in Nevada and have to file a NV tax return.
*The information contained in this post is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client nor a CPA-client relationship.
@Ian Tan , the LLC issue seems to be one where being a California resident is a detriment.
From my reading and listening, it seems like there are a couple of ways to streamline your operation to at least minimize the financial burden of their minimum fee, such as forming 1 LLC in Nevada to be the "parent" LLC to others. I believe this option is called a "series LLC." [ @Katie Lepore please correct me if I'm wrong.] However, there is seemingly no way around the minimum $800 charge for that first LLC. Other strategies including using land trusts.
Your CPA may not be a big fan of these strategies, as the paper trail may become complex, but for those with experience dealing with investors, it likely won't be a big issue.
@Katie Lepore Bummer! Thanks for the info. What a way to eat into rental income returns. I wonder how other California investors deal with this issue. I'll post back when I learn more.
Probably NV because you avoid the CA fees, and the property is in NV anyway, but either way I would absolutely ask your accountant (hopefully an RE-experienced one). I think only the accountants and possibly an attorney should be the ones to advise you. Setting up entities is far from a 'one size fits all' strategy and is really specific to each individual situations.
The lender will have to be licensed to be able to lend in the state in which you buy. Doesn't matter where they are based out of, just have to be able to lend in that state.
1. Create an LLC in Wyoming as it will be the lowest cost to you.
2. Nevada lender would be best.
@Ian Tan I am also a California resident that invests out of state. Please feel free to reach out, I would be happy to answer any questions you may have.
This is a controversial topic to which I have heard much advice. I suggest you also read up on my BP post
With that said, I would seek professional advice from both in state CA firms as well as out of state firms, weigh the pros and cons of each, and also the direction with which you want to take to build your business.
Everyone, thanks so much for taking the time to answer my question. It's given me plenty of food for thought and things to look into.
I'll continue researching the topic on my end, and if I come across anything you haven't already posted, I'll be sure to post in kind. Blessings!