Will a LLC in Nevada protect my California asset?

Question

Jenifer Levini · Answer

Hi @Vaden Hoffman, I'm a lawyer in California and an investor. All this advice youve gotten there is pretty accurate. If you register in Nevada but are "doing business" in California you still have to pay the minimum of $800 to Calif. Plus you have to apportion your income between two states and file additional schedules (Schedule R) when doing income taxes (which means paying accounting fees). The state of California wont let us get away from this fee. And the more we try the more states we end up paying.

Ive looked for other ways to get around this too, to no avail.

Its briefly described here: http://www.taxes.ca.gov/income_tax/limliacobus.sht...

If you want help with your legal work within Calif, forming LLCs... please feel free to reach out to me here via the private messages.

Jen

Ive looked for other ways to get around this too, to no avail.

Its briefly described here: http://www.taxes.ca.gov/income_tax/limliacobus.sht...

If you want help with your legal work within Calif, forming LLCs... please feel free to reach out to me here via the private messages.

Jen

Account Closed · Answer

I'm not a lawyer just so everyone knows.  But when I used to invest full time, all properties were contracted under my llc's name, which protected me from personal liabilities (I live in Nevada and did fair number of California deals back then).

I would think same rule will apply? I don't see a reason why it wouldn't protect you, assuming you are purchasing it under llc to begin with.

Now, if you already purchased the property under you name and wanting to switch to llc, that's a different story if you financed it.

Hope that helps.

Christopher Johlfs · Answer

All (well... I think just about all but like 4 or 5) require an address in the state an entity is filed to act as your registered agent.  Plenty of online registered agents will be happy to provide that service for you, for an annual fee (anywhere from $59-$99/year...(some offer first year free) anything more and they are overcharging).  This is an office, in that state, open during all business hours, that will receive any and all service of process for that entity, in that state (if you get sued, they deliver the paperwork to the registered agent, RA).

From what I understood, and I can be wrong, if the entity owns a property in Y state, then the entity will need to be registered in that state as it is technically "doing business" in that state.  Whether it is domestic (originally formed in that State) or Foreign (registered in N state and then registered to do business in Y state as a foreign entity governed under the laws of N state) OR you can form an entity in N state and another in Y state where your property is located in and have the entity in N state own and be listed as the member or/and manager of the entity filed in Y state that holds the property.  Clear tax differences and each person's situations will dictate or will make more sense to do one over the other.

NV shows all member/manager information, like CA but DE does not show any info unless you request official copies of filed docs (which anyone can do for a fee in any state).

When conducting business in a state, owning property, owned by an entity, that entity should be registered to do business in that state to be covered and protected under the corporate veil or limited liability of an LLC.

I could be wrong but that's how I understand the 'rules'...

Jonathan Orr · Answer

@Vaden Hoffman You should be fine to use a out of state LLC as long as the LLC has a state address where you file it.  Also remember just because it is out of state, it still needs to be approved as a out of state LLC for CA.

Just recently I purchased a property in IL and used a DE LLC because it was a syndication.  We created it through our attorney and then had it approved in IL.

I think you will be fine, however I am not an attorney and please consult your local attorney for confirmation.

Also, if I am not mistaken even if the LLC is outside of CA but doing business in CA you will still have to pay that $800

Jonathan Orr · Answer

Yea, we used a Registered Agent.  I know my attorney was looking at Nevada but the tax implications when we sell was much worse than DE.  I guess long story short that CA will charge you the same regardless of LLC filing (so they can take our money).

Account Closed · Answer

@Vaden Hoffman No problem, glad it helped.  You always want to work it out with lawyers on these things.  I always like to remind myself that one wrong ignorant move can alter my livelihood.

@Jonathan Orr You are correct sir you need an address for Nevada LLC as well.  Not sure about Delaware but in Nevada, you can get registered agent service to get around that, I believe.  Unless they changed the law.

Will a LLC in Nevada protect my California asset?

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