I've heard good things about Nevada, Wyoming and Delaware. Can anyone offer advice as to incorporating out of state and the best course of action? Thanks!
There are plus sides and minus sides to each. My advice would be to do a lot of research on this as there is a lot of bad information out there and a lot of scams. You also need to be aware of Massachusetts laws. I do not know them so you need to do your own research. For instance, here in California, if I incorporate in Wyoming and have a rental property in Wyoming, since I live in California I still have to pay the $800 annual fee to have a corporation in California even though the property is in another state.
I would definitely talk to an estate planning attorney on this issue. I can also recommend looking up Mark J. Kohler, he is a CPA and attorney who has a free podcast/radio show. This topic comes up on a somewhat regular basis and every couple of months he has an Open Forum show where you can either call in to ask a question or you can email your question in and they'll try to answer it.
Best of luck!
While I would not take anything I am saying as legal or tax advice I know a little more about MA in general and will give you my thoughts on this.
First IF you are doing the situation that Eric described of buying a rental property in another state and incorporating in that state then that makes sense and you will not have to register it in MA or pay the $500 annual filing fees (for an LLC). You will still pay MA state income tax on the flow though profits on any entity that is taxed that way (As far as I know that is anything other than a C-Corp).
If your intention is to buy, sell or hold title and lease properties in the state of MA then just register here. You will have to register the entity as a foreign entity in the state and pay all the same fees. But now you have to keep it registered in both states and pay both sets of fees and if the state you establish the entity in has income or entity business taxes you could be subject to those as well as the MA ones.
Also by having to register in this state you will lose pretty much any of the benefits touted by the out of state incorporation advocates IMO.
Again IMHO take your opinion of the scummiest RE Education GURU and apply that to anyone that advocates setting up an entity for a real estate business in any state other than where the real estate is located (Or where you are located if you plan on working in multiple states and only want to maintain one entity).
Awesome, thanks for the responses. I definitely need to do more research as I'm not sure exactly where my buy and hold properties will be located.
If you're the sole owner, file/incorporate/establish wherever's convenient (but first define what you consider to be convenience). As a solo operator, one state is generally as good as the next, but your mileage may vary.
If you have even one partner, make it Delaware. Absolutely no other jurisdiction has as well a developed history of case law and experienced jurists to handle whatever dispute will arise, and yes, disputes will arise.
@Anthony DiRico The best state to incorporate in is the one that you operate your business in. Delaware and NV have some perks at the state level that aren't so perky at the federal level. Most states will require that you file state taxes if you are registered there...something else to consider.
Erik, We are having Attorney Alan Segal speak on EXACTLY this topic on August 26 at Black Diamond. If you can make that meeting, Alan will address Wyoming, Nevada, Delaware Series LLCs, trusts, Incs, etc. He has presented on this topic at MIT and works in his own practice in asset protection in MA. So if you can make it, you'll get a chance to hear all the differences and ask all the questions you want. See details at the URL in my signature.
This sounds self promoting but the event is free with no selling speakers ever and no meeting fees or memberships.
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
Create Lasting Wealth Through Real Estate
Join the millions of people achieving financial freedom through the power of real estate investing