Flipping in Multiple States with a Partnership

3 Replies

I have a partner here in the state of WA with me, and we want to flip houses remotely in other states. Although I already have an LLC that I do flips with here locally, my partner and I want to create a new one for this venture so that we both can count these flips as part of our experience (so that in the future we get better treatment from lenders).

My question is... if we are going to be flipping houses in multiple cities (right now looking at Chicago, IL but have considered Ohio cities and a couple other places), does it make sense to:

1.  Create the LLC in WA and then register it in each state that we flip in.  An IL attorney told me that the fee to create or register a foreign entity in the state is the same: $500.  If I create it here in WA ($200 filing fee, $75 annual renewal), I'm very familiar with how to manage the admin stuff, and I can act as my own registered agent.  Although I think I'd also need a registered agent for the foreign entity in Chicago.

2.  Create the LLC in Chicago and then register it in each state that we flip in. That way I don't have extra costs in WA. But not sure if it's difficult or more costly to have our partnership's "home base" in Chicago. Am I going to be double-taxed if I flip somewhere else using a Chicago LLC? WA state doesn't have state income tax.

3.  Create LLCs in each state that we flip in.  This way doesn't make sense to me and seems the most costly, but wondering if there is an advantage to it.

Keep in mind that you will need to register each LLC in the state where that LLC has activity. In addition, take into consideration the state statutes for the state you ultimately do decide to form the LLC. Each state has different LLC statutes, and some offer more protection than others.

@Nghi Le I think the LLC formation is the least of your worries. I think you should focus on making money first. Having the perfect LLC set up is useless if it doesn't make money. I hope you know the Chicago market very well. Otherwise, how will you know if you have found a good deal? Please don't rely on Zillow to give you all the answers. There is no way I would try flipping houses in another state unless I was an expert in that market. If you plan to rehab property from out of state, I fear you will lose all of your money, or the bank's money.

@Lance Lvovsky

Yeah, we do recognize having to pay the foreign entity registration in each state.  What you're saying about the state statutes makes me lean more towards having the home base in WA.

@Anthony Dooley

I can't make an offer on something if I don't have the entity set up. I have my team set up on the ground already, and we're looking at several deals. I'm working with a couple partners (so more than one eye) on the deal, and my hard money lender is my last line of defense. Sometimes they do an even stricter due diligence than I do, and we always get an appraisal to verify as-is and ARV values. It's not a go unless it passes everyone's checklists.

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