Where to register an LLC?

Question

Hey everyone, I'm super excited/nervous to finally start real estate investing after saving up for about 4 years! I've been following BiggerPockets content for a while and am ready to bombard y'all with questions 😁

Here's the first one:

I've read that it's a good idea to purchase a rental property under an LLC to remain anonymous to disgruntled tenants, separate your business and personal assets, etc. I live in California and am looking to buy my first rental property in Atlanta, GA, but will likely buy properties in different states in the future. I've read that some states are better than others for starting a business in (i.e Nevada has 0% corporate income tax rate and business-friendly laws). I've also read that it's a good idea to register an LLC in the state that the business is conducted in, which in this case would be Georgia. On the other hand, if I register the LLC in California, my taxes would be a lot simpler because I would only have to file in 1 state.

So, given my situation, should I register my LLC in California, Georgia, or Nevada?

Basit Siddiqi · Answer

@Naman ShahJust because you register an LLC in a state without an income tax doesn't mean that the income generated within the LLC will not be subject to income tax.State taxation will depend on the state where the member lives and where the business is conducted.Also be mindful that you may be subject to California's $800 fee regardless of where the LLC is created aslong as you are a managing member.

Brenden Mitchum · Answer

Hey @Naman Shah, welcome to the BP community.

Either choose the state you live in or the state you're doing business in. If you want to get fancy and complicated, speak with a REI attorney first (and probably a CPA).

Also, don't set anything up until you purchase your first property. Too many folks (myself included) register an LLC as one of their first "action" steps but it's really just going to cost you time and money and does not serve any purpose until you have your first property. So, focus on that first. You can easily transfer title to your LLC shortly after purchase.

From what I've heard, land trusts don't provide any asset protection or tax benefits as an LLC would so DEFINITELY speak with an attorney before going down that road. I'd be happy to recommend my guy here in Atlanta.

Shoot me a message if you want his contact info or if you just want to chat!

Mark Pedroza · Answer

I'm no financial planer or a lawyer but you might also want to consider putting this property and any future properties in a land trust. @Naman Shah