Entity Decisions and Entity Locations
We are starting a new Real Estate investing venture,purchasing multifamily homes in a few various markets we have intially targeted, in various states.
As we prepare to get this going we are planning on starting a new LLC. My question: is there any advantage to starting this new LLC in Nevada or Delaware even though we probably are not going to purchase a property in either of these states? I reside in NJ and partner in Mass.
Also we were looking into the theory of starting a C-Corp in addition to the LLC, possibly in Nevada or Delaware and assuming our real estate investments turn a profit we could divert some of this income towards the C-Corp as a property management fee.
Any theories or experiences good or bad relating to some of this.
My friend in New Hampshire has done something like this with his businesses. His Corps are in Nevada. He upstreams his positive cash to a LLLP, I didn't even know they existed till he showed me his docs. You might want to look into that.
My husband and I are working living in San Diego but incorperated in Nevada and Foriegn Filed in CA. Just an S corp. We are planning on purchasing a second corp, an LLC, this year for future properties also in Nevada, but that one still needs to be forgien filed in CA, the last Corp we will get will be a C corp in Nevada but with a resident agent. That one will be the holding Corp a management / advertising company, working for the LLC and the S Corp. The theroy being if your businesss or properties look like they are going to make an profit that year you could purchase managment, advertising or consulting services from your C-corp. Therefore moving your money from your left hand to your right hand. It's legal BUT you need to have a really good paper trail and set up you Corps and DBA's correctly. The Nevada corp will not report who the owners are if someone were to sue. The C corp doesn't have to be connected to you and some resident agents don't require the use of your SS# even. If you are worried about the veil being pierced.
My friend makes millions and yet his tax returns will tell you that he only make $20,000 a year.
There's are so many things it's amazing what you can do but please BE CAREFUL and meticulious. Doing this right = great savings, but doing it wrong = possible fraud, fines, and jail time. We are moving VERY slow with this. Trust but verify. Good luck to you!
#4 Off Topic Contributor
- Investor
- Round Rock, TX
Our private equity fund buys properties in multiple states and is set up in Delaware. These all sound like good questions for an attorney that understands what you are trying to do.
Why a c-corp?
If you find an attorney please refer them. We have been looking for one in CA and everyone we have talked to says you can't incorporate out of state legally. We've hit a wall with CA lawyers, should I maybe find a Nevada or Delaware lawyer?
Bryan - Why Deleware instead of Nevada? Do they have better laws or protection when dealing with RE?
#4 Off Topic Contributor
- Investor
- Round Rock, TX
I'm not really sure. I wasn't the architect of the firm. My suspicion is that it may be an artifact of the well-established corporate case law for series LLCs there.
That makes sense, I see that. It's just that Delaware does report to the IRS and Nevada I believe doesn't which can mean less audits.
Thank you for the info I find your posts most helpful in other forum discussions.
Good luck in 2011.