Out of State Property - Where to form LLC?

6 Replies

Myself and two of my partners are purchasing a multi-family rental property in Wisconsin. My partner and I are residents of Illinois. Our third partner is a resident of New York State. Where should we form the LLC? In Wisconsin or Illinois? What are the pros and cons of each? Does Illinois LLC offer more protection than a Wisconsin LLC? Also are there any differences when it comes to taxation?

Any advice you can provide is appreciated.  Thanks!

you will need a WI LLC if thats where the property is, and resident agent services, and depending on the municipality a "local" contact person, for asset protection, it may not hurt to consult Rich Dad adviser Garrett Sutton's team, from what I understand, Wyoming, Nevada, and Delaware offer the best protections.

To avoid paying multi state LLC fees choose the state where you are doing business. Form in Illinois and Wisconsin will treat you as a foreign entity and charge you a second time and you will need two state income tax returns. Form in Wisconsin and you and your New York Partner will receive K-1 statements and avoid that..

I don't think anyone should answer this other than an experienced REI accountant in one of your states and/or an entity structuring specialist. Every single situation is different, so there's no real way for anyone on here to tell you (in my opinion).

You truly can form one anywhere. Here are some of my suggestions on the subject. Texas, Delaware, Wyoming, and Nevada have strong protections.

Keep in mind that with an out-of-state LLC you will need a registered agent. Some investors complain about this cost, but it's a fairly cheap requirement to meet. If you're using an attorney to form your entity, that attorney may be able to serve as your registered agent.