Questions Regarding Starting an Out of State LLC

7 Replies

Hi All,

My partner and I plan on doing business in the Philadelphia area but want to float an LLC either in Nevada or Wyoming. I have been doing some reading on the internet regarding this subject and have an idea but would like to know what everyone thinks (Any input is appreciated). So here I am wondering if any of you can help direct me in the correct path or connect me to the right people that have been thru this process before.

1. What are the benefits of starting an Nevada LLC vs Wyoming LLC vs Delaware LLC?

2. Do we need to foreign file in the city of Philadelphia or in the state of Pennsylvania if we start an LLC in any of the above states? One or the other or both?

3. Do we need to get a business license in Philadelphia or in the state of Pennsylvania to do business? If yes, What documentation or what is required to do so?

4. Do you recommend wrapping this LLC with a TRUST? If yes, Why and What might be the charges?

Thanks. Look forward for your replies.

    @Anurag Velchala if your interested in starting a Nevada Llc check out nchinc.com You can arrange a call with one of their sales people to get all the ins and outs. Just be aware they are a private company and will try to sell you on their services. Alot of what they offer you can probably do yourself from what I've researched.

    1. It depends on what you are looking to do. For example, many folks incorporate in Delaware if the end goal is to go public. Delaware is also popular amongst mega-corporations due to the Court of Chancery. Think about it as a special court that only deals with corporate/shareholder matters. It's a very well-respected court. If your business generates a lot of taxable income at the state level, all three have low-to-zero rates.

    Now the real question is whether any of that would benefit the average real estate investor. That's a harder question to answer. Reasonable people can disagree but I personally don't see a meaningful benefit.

    For what it's worth, I incorporate my real-estate-holding LLC in the state where the property is. For almost every other entity, I use a Pennsylvania LLC. I do so since that's where I (and most of my business partners) live.

    We did create a Delaware LLC once. But we didn't have any fancy reason. The main reason was that the members came from various locations on the East Coast. Delaware was a "neutral" enough jurisdiction for everyone involved. Due to the Court of Chancery, the caselaw there is generally reasonable. And it's remote enough that it's annoying for everyone to bring silly lawsuits against each other.

    2. It depends. I think it's better to register with the Commonwealth even if you don't need to. That's especially true if you will need the ability to sue someone (or bring a counterclaim if you get sued). But it's not required in some situations.

    I'm not sure about Philly-specific requirements. I would think it would depend on what the underlying business is. I'm sure they make some businesses register with the city.

    3. It depends on what the business is. Commonwealth issues licenses for some businesses. Philly may have it's own license requirements as well depending on the business.

    4. It depends on your business and personal situation. I'm generally against trusts until it is absolutely necessary. Pennsylvania had many unscrupulous lawyers that tried to sell trusts as a cure-all for all issues and then got into a lot of trouble. So I might just be jaded on this particular topic.

    In any event, this is one area where you really need to think about why you need it. For example, saying "liability protection" is not enough. You have to go one step deeper and ask what kind of liability you are trying to protect from.

    Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

    @Anurag Velchala I have helped a handful of my NY and Cali buyers do this exact thing. PA is a title closing, not attorney closing state. If your LLC is out of state, all title companies require a certificate of good standing. It is quick to submit but can take anywhere from 2 hours to 2 weeks to receive depending if you pay extra to have it done same day or opt out for the cheaper delayed process with snail mail. Title needs scans of these documents to be able to close. I DEFINITELY ADVISE YOU DO THIS BEFORE YOU GET UNDER CONTRACT FOR AN OUT OF STATE PROPERTY. It's a good life practice to never have an important part of closing being dependent on the speed of government agencies.

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