Which State to Incorporate In

Question

Hey All,

Purchasing a building in Philadelphia, PA as a New Jersey resident.  Do you recommend the LLC that will own the building be incorporated in PA, NJ or does it not matter?

Thanks for your advice in advance.

Chris K. · Answer

@Nabeel Mahmud

Always consult with your own lawyer, but I think you have two basic factors to balance: (1) the location of the investment property; and (2) the location of your attorney contacts. For rental properties, my gut instinct is to incorporate in the state where the rental property is. But then, I don't really go out of PA to invest unless it's a big enough deal where I know I need a local attorney.

Now if you have an attorney that you really like, perhaps it might make sense for you to incorporate in the state where he or she practices. For example, I do this for some of my entrepreneurial friends where I help them incorporate in Pennsylvania. Now I suppose you could argue that Wyoming, Nevada, or Delaware is "better." But many of these guys would rather have the benefit of having a lawyer friend in PA or those advantages.

@Robert T. raised a good point about the fact that you sometimes may need to register as a foreign entity (although you may not need to do so here). If you do, that could lead you to incur some additional costs.

So it all depends on several factors.

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 as legal advice. Always consult with your attorney before you rely on the above information.

Robert T. · Answer

Many states require you to register your entity locally, even if registered out of state.  The result is you pay in both states.  From a personal standpoint, registering in your local state allows you to use a local attorney, but who may not know PA statutes.