I'm not an accountant or an attorney so don't take this as legal or tax advice but I know off the top of my head that California has weak LLC laws and Nevada has strong ones on the asset protection side. Go with Nevada.
As for the tax stuff single member LLCs can be pass through for tax purposes however you can elect different tax options. It depends what kind of business, how many shareholders, what you want to achieve etc.
It would be a good idea to engage an attorney and a CPA and have a chat to both of them about what you want to do. There are some great books on the topic as well.
Hope that helps
You're definitely going to want to talk to an accountant or more likely an attorney to figure out the best path for you. If you're a CA resident, you may be subject to taxes in CA regardless of where you create the LLC. Nevada has no state income tax but you need to ask a professional if you will still be subject to tax depending on your situation. I beg to differ with @David Turnbull that CA has weak laws. The draw to NV is normally for tax purposes as CA is very protective of its businesses (and its revenue). In either event you will want to make sure your LLC operating agreement is drafted correctly (especially in light of the brand new partnership audit rules) and ensure an LLC is even the right choice for you. You may be able to accomplish the same effect with an umbrella policy or maybe a partnership with less annual filing fees and requirements. These are really questions on an individualized basis. If you’re looking in San Diego, I can shoot you the names of some attorneys or accountants if you need. Good luck!
*none of this post is intended to create an attorney-client or CPA-client relationship and recipient should consult with professionals for advice
Really @Katie Lepore ? Doesn't the charging order created as a result of a judgement not apply for the LLC only has one member in California? Wheras it does in Nevada. To clarify I didn't mean California had weak laws I meant specifically in regards to asset protection and single member LLCs. I really should leave these types of posts to attorneys haha
Ditto on talk to a CPA/attorney.
I’ve heard that NV sometimes has more favorable laws when it comes to liability/asset protection. Sometimes people will form
LLCs in different states because laws are more favorable for their situation. (Think of all the Delaware LLCs for none-DE companies.)
California does have a gross receipts tax for any CAs formed or registered in CA. My understanding is that regardless of where an LLC is formed, it would need to registered in the state holding the real property.
As I understand it, if you are a CA resident, all income is taxed at CA rates.
If you are out of state, but earn some income in CA, that CA earned income will be taxed at CA rates.
@Meldeine Sipes One data point from someone who's been down this road and ended up creating an LLC in CA:
CA is very protective of its revenue. As a CA resident, I'm obligated by FTB Section 23101 - it basically says: "If you live in CA, and you do substantial work on behalf of an LLC that's based elsewhere, that LLC must register in CA and pay $800 per year."
Now, how they know or whether they'd come after you is a separate question. But, I don't care to mess with that.
It is normally suggested to create the LLC in the state that the property is located in. If the property is located in Nevada; create the LLC in Nevada. If the property is located in CA; create the LLC in California.
If you create the LLC in Nevada and own the property in California - You would need to
- Pay to register the LLC in Nevada
- Pay for a registered agent in Nevada
- Pay an annual fee to the Nevada SOS every year
- register the LLC as a foreign entity in California
- Since CA already deems you to be doing business in CA if you make important decisions in CA; CA will require you to file a CA LLC return(568) and pay the $800.
You can avoid steps 1-3 if you register in CA if the property is located in CA.
Great info thank you. I will definitely speak with a CPA and or a real estate lawyer. I’m hoping t just LegalZoom it but I thought bk I need to really sit down with a pro. I am speaking with a realtor/property manager tomorrow about my property crieria.
@Katie Lepore, San Diego is one of my long term goals. I definitely would like to start networking with professionals there.
Hey don't rule out the Utah llc. $70 to the state and $15 renewals.
Strictly on a cost level (and my home state) it makes sense for me, but You will for sure need a legal professional to point you in the right direction for your needs.