Incorporate LLC in Wyoming Vs Michigan?

Question

Hi BP members,

I'm wondering if anyone can provide some real world practical advice on the pros and cons of registering my LLC in Wyoming (for charging order protection) versus registering my LLC in Michigan (my home state and the place I will be buying properties). My lawyer said that he has had clients with out of state LLCs that had issues getting approved for loans because "they were seen as a suspicious outside company buying up local assets". Thank you for the insights.

-Kevin

Joe Hammel · Answer

@Kevin Cooper

If you’re planning on acquiring quite a few properties a common strategy is:

1. Own a Holding company LLC in Wyoming..or Nevada (Favorable laws)

2. Have Michigan LLCs with 1-10 proeprties in them, held by your holding company

Not legal advice, just my personal and a popular strategy in the industry.

We have a write up on LLCs we can share if you’d like.

Kevin Cooper · Answer

Thank you @Scott Smith. That’s some great info. So much to learn here!

Account Closed · Answer

Someone who owned a Wyoming law firm must've done an excellent job marketing on BiggerPockets at some point. I have no idea why this comes up so often. You can set up a Michigan LLC such that people don't know who the members are. Not sure why anyone would set up an LLC in Wyoming only to form another one in Michigan when some entity has to hold the real estate at the end of the day and that entity is the one that's gonna get sued in Michigan courts.

Drew Sygit · Answer

You an have an attorney, a CPA or any other professional act as the agent for the LLC in Michigan and use their name and address. This protects the owner's identity.

Just don't be ignorant and use your name, initials, street, or anything else that can link you personally to the LLC.

Kevin Hofstee · Answer

From my understanding Michigan has that same level of anonymity, so then why still have the Wyoming LLC on top of that?

Scott Smith · Answer

One of the major benefits of establishing an LLC in Wyoming is that is introduces a level of anonymity within the entity itself. This means that your name is not going to be listed on public record for that LLC, which can deter lawsuits before they even take place because potential plaintiffs and opposing counsel will need to invest in discovery before even being able to prove you own the entity. The same function can also often be accomplished through using a land trust with a regular LLC with the assistance of an attorney, as described in this article. The land trusts also offer a few additional benefits above the Wyoming LLC, but the anonymity would likely be the reason it was recommended to you.

This isn't legal advice, just my opinion as a real estate investor.

Kevin Cooper · Answer

If I understand what I’m reading here about MICHIGAN law correctly: 1) the court can charge my LLC with paying the damages awarded a plaintiff. 2) the plaintiff is only entitled to distributions from the LLC. 3) this does not deprive me of any exemptions the LLC enjoys. 4) the plaintiff does not gain membership to my LLC or deprive me of membership and my rights therein. 5) the charging order is a lien that cannot be foreclosed on. 6) this is the exclusive means a plaintiff has of satisfying a judgement against my LLC.

Sounds like the same protection you would enjoy from Wyoming.

Kyle Shankin · Answer

In my opinion, Incorporating at any capacity is a good thing @Kevin Cooper.

Kevin Cooper · Answer

Thanks for the reply @Kyle Shankin. Super interested to see what you found out. I’ve already requested the LLC from the state of MI based on the advice of my attorney. Hoping I won’t regret that.

Incorporate LLC in Wyoming Vs Michigan?

Incorporate LLC in Wyoming Vs Michigan?

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