Delaware LLC for Management Company?

Question

Currently have a management company that handles the management of commercial properties in varying states including Texas, Florida, Alabama, and Tennessee. Asset types vary from small retail centers to hotels. Does it make sense to create a new LLC under the state of Delaware or would I be better of in just incorporating in one of the states we own in. I have heard varying info such as there really is not much of a benefit to some claiming it offers great protection. Anyone create a Delaware LLC or any attorneys that could briefly provide some advice? Thanks.

Aaron K. · Answer

Not really a benefit unless you operate in Delaware as you have to foreign qualify your business anyway.

Ronald Rohde · Answer

I wouldn't conclude that just yet. There are plenty of good reasons for DE, cost is just one factor.

Jimmy Klein · Answer

@Ronald Rohde Thanks this is great info. So I guess the best way to think about it is that a Delaware LLC is not really going to help much then? Probably just makes more sense to look at the yearly fees.

Ronald Rohde · Answer

Okay, I was confused as to "have a" does that mean an ownership interest or a service contract or neither?

It sounds like you just need a parent entity to consolidate revenue, each agreement would be with each state PM entity that you create. You should definitely be collecting fees, I wouldn't do all that work for free.

Texas is a good state, higher initial cost, but no annual fees. DE has low initial costs, but higher annual.

Jimmy Klein · Answer

@Ronald Rohde So we have an individual LLC for each asset of course. I have varying degrees of ownership percentage in each LLC (property). That LLC (which includes me and other investors) will sign a management agreement with my management company. I have been handling all operations. There is no exit strategy for the management company since its just a way to collect a management fee. As for the individual properties, as those are sold, the management agreement would expire or be terminated. So thats why I am not sure if I need a DE LLC or not? Also with us having multiple assets spread over other states, if I dont do a DE LLC, which state would I create the management company in? Appreciate your guidance. Thanks.

Ronald Rohde · Answer

What is your current structure? Do you have local entities already? Are you looking to tie up common ownership ? Thats a primary motivation for a DE parent, its easy to understand for consolidation for taxes and exit sale. Whats your exit strategy?

Delaware LLC for Management Company?

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