What state to start an LLC?

Question

So I am planning to begin wholesaling in Arizona and want to get my LLC registered ASAP.

After quick research it said file in state if you are going to have a store front (which I will not) or would be doing must of your business in state (which I would).

It says you may want to file out of state, most commonly Delaware, if you wont have a store front or will be doing business out of state.

Wanted to get some opinions on what people thought and gather any advice I could.

Thanks!

Brian Bradley · Answer

@Christopher Lane you are in CA. So if you are talking about yourself, what I like for CA investors is a Delaware Statutory Trust to work as the asset holding company. It is a Business Trust so no Articles of Incorporation and you can series out assets into child series into the trust, and not have to pay the CA Franchise tax of $800 per series. Once tax filing and For the DST your CPA treats it as a pass through Grantor Trust, or they can file a trust tax return. But, you should distribute all the income to the beneficiaries so they don't have to pay trust tax rates. Then you set up a side traditional LLC as an operating company that holds no assets, just does the contracting and operations etc.

Brian Bradley · Answer

@Christopher Lane I am not advising you on anything. But if you are a resident of FL, and live in CA, you have a nice tax mess on your hands. Talk to your CPA about that. I would avoid starting anything in CA if I could. If you are a resident of FL, FL has good Asset Protection Laws. You can create a FL traditional LLC with a land trust and use that and a side traditional operating company, or you can go with a TX, NV or DE Series LLC as the holding company and connected to a land trust, with a side operating company.

Lots of ways to skin the cat or divide the pie. You just need to get on the phon with an asset protection attorney to go over your situation in a lot more detail then on any forum. And talk to them. Not opinions from investors and non lawyers. Talk to your CPA for the Tax issues, and talk to a few asset protection specific attorneys for real estate investors for the law side and options. Its a matter of finding what works for you now, and then room to grow, and keeping it simple and streamlined.

Ned Carey · Answer

@Marc Gleason in just about every state, if you are doing business in that state and your LLC is from a different state, you have to register your out of state LLC as a "Foreign entity" This negates many advantages and any privacy you get from states like Nevada or Wyoming.

Chris Pflum · Answer

@Marc Gleason I'm in agreement with @Michael Krotchie on this in that you should probably be setting up the LLC in the state you are doing business in.  Even if you set it up in another state, you'd still have to register it in the state you're doing business in, which just makes it cost ineffective to do it in another state.

Your best bet is to always talk to your accountant first.  They'll help you pick the best structure to minimize your expenses, and especially your tax liability.

Christopher Lane · Answer

I live in CA, but have legal residence in Florida. I want to eventually own properties in multiple states.  My goal, albeit ambitious, is 100 doors by the end of 2020.   I'm only doing it (LLC) to protect my family from lawsuits, and the tax benefits.  would that change your advice?

Christopher Lane · Answer

@Brian Bradley I agree, I'm not smart enough to know how to set up my business, but I do know it varies by your goals.

That being said, I've heard you incorporate an LLC for every $300k worth of properties you own, then have them report to an S-Corp and then take your salary from the S-Corp, not sure if that's true... any insight?

Brian Bradley · Answer

@Marc Gleason I am an asset protection attorney. it depends on your overall goal and investment. I recommend starting asset protection companies in the strongest states for protection of member owners and that has the best judgment order laws. Like any business, you can incorporate anywhere. You will most likely over time add assets all over as you find deals, and markets and deals shift. (DE, WY, NV, TX) are the main 4. AZ is coming along. DE is more name value now and nostalgia. NV and TX are very strong asset protection states with protection for the LLC or Series LLC member owners as well as strong charging order laws.

Michael Krotchie · Answer

I would recommend setting it up in AZ as that is where you will be conducting business; as a side-note if you are looking into the online LLC setup, checkout Incorp as an alternative to Legalzoom.

Aaron K. · Answer

If you aren't wholesaling in AZ then where are you wholesaling?  wherever you plan to do business is where the LLC should be.

What state to start an LLC?

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