LLC for Joint Purchase - NJ and CA partners investing in PA

[Carrie Matuga]

A friend @AlisonK8 and I are considering a 50/50 partnership where I would fund a greater portion (or perhaps all) and they would apply for the loan based on their credit score. Many questions arise - where to set up the LLC. Would she be setting herself up for a CA tax liability (where I live) when she's in NJ and the investment is in PA? We are thinking to establish the LLC in PA where the property/properties would be. What should we consider? Is it best to start with a lawyer to draw up the agreement or an accountant to discuss the CA implications and where to set up the LLC? We are buy and hold investors.

[Basit Siddiqi]

Originally posted by @David M.:

@Carrie Matuga

Consult some professionals, but setup the LLC in PA since that is where the property is located. Otherwise, the LLC will have no legal standing in the State

Unless you elect to be taxed as a C Corp, your LLC will be taxed as a partnership which is still a pass through entity. The profit/losses will be calc as per your Operating Agreement, then passed onto each of your personal returns via a K-1 form. So you see, you each will to worry about your own tax returns, Federal and State, on your own profit/loss

Don't forget that CA will charge you $800 annually for every LLC you have, regardless of where it is formed.

That’s the short of it. Have to sleep. Hope that helps. Good luck.

She may not be required to pay the $800/annual if they structure the LLC where she is a non-managing member.