Business structure with properties in multiple states

[Jason Turo]

A business partner and I are from different states starting a buy/hold investment company. We are thinking of opening an LLC with a business account as our "main" account for any business operating expenses and have checking accounts for each house. We are thinking about purchasing properties in multiple states.

Would it be advisable to start an LLC in the initial state of purchase, then register as a foreign entity in each other state properties are purchased or open LLC's in each state we own property (or another structure you recommend)?

[Chris K.]

@Jason Turo

Hard to say without knowing more about your exact situation. I do like the structure that @Carl Fischer proposed, but something that can cause problems. I don't want to sidetrack the discussion, but the State Real Estate Commission has pointed to those arrangements to add additional fines in some cases. A separate discussion for another day. 

In any event, I generally think it is easiest for the real-estate-holding entity to be from the state where the property is. So if you are buying a Pennsylvania property, I would create a Pennsylvania LLC (or some other entity) to own the underlying real estate. Now one of the owners of the Pennsylvania LLC can be an out-of-state LLC in some cases. Whether you need to do so depends again on the exact situation.

I would suggest that you and your partner actually hire an attorney and a CPA to go over the situation. If you guys do not have an immediate plan to buy properties in multiple states, you can most likely wait on figuring out the exact arrangement. 

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.