After reading couple of books and many articles i got the feeling that living in California and doing investment is not legally well protected
Long story short I’m looking for a good way to protect my future assets and pay minimum tax
E.g active (multi family rentals) or passive investments in other states
My options are
-Form a California llc and live with it
-Wyoming or Nevada llc, and registered for California biz
Please share your thoughts
And refer cost effective legal advisers in nor cal
I would recommend you look for some good insurance and see how much umbrella insurance coverage you can buy with the $800 you'd use for LLC...It really seems that quite a bit of more beginner investors are very quick to start LLCs, it is not that difficult for a good lawyer to pierce through it. I assume it is because of forums like this and easy buck for a lot of lawyers to form LLCs for investors. You should get a good understanding of what you really want and what you are trying to protect yourself from before starting different corporations. I'm not a lawyer so definitely take anything I say with a grain of salt but you are more likely to get into a car accident and hurt someone pretty badly than have a tenant sue you...someone you hurt in a car accident can come after you and everything you own, so having all your properties in several LLCs will not save you in that scenario but having great insurance just might...
Of course to get the most protection possible is usually having a good combo of corporate structure and decent insurance but when costs start to add up and you only have one property to start with you have to see what gives you the most protection and bang for your buck.
Good Luck :)
Starting an LLC or using one it CA does not make a difference. You will have a high filing fee and have to pay someone to do the taxes for the LLC as well as still doing your personal taxes. By using an LLC you are just feeding the government more of your money.
Keep your properties well maintained and buy liability insurance.
There are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice. Will depend on several factors like the type of property, type of tenants, your risk tolerance, other assets you own, your estate planning, laws where the property is located, etc.
Any lawsuits would be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced). But, an LLC will not limit you from liability in total. You can still lose your investment in the LLC. If you're going the umbrella insurance route, make sure it will cover you for several things including just the routine slip and fall (like mold or earthquake). You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.
Creating an LLC in California would cost you a minimum tax of $800 every year. You would have ongoing filing requirements with the State and would need to keep business records and documentation.
You also want to look at whether a pass-through entity helps your bottom line and your taxes. There is a new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies. You should still be able to get this even if the properties are not in an LLC, if you qualify.
These are all things you will want to discuss with your attorney and CPA. If you need references for either of them in San Diego, let me know.
*This post does not create an attorney-client or CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.
Hi @Saleh Sedighi
For California investors, you can either use an LLC that has strong charging order protection (DE, WY, TX, or NV are most common) or if you are doing a buy / hold strategy with your assets you can use a Delaware Statutory Trust. When using the LLC you may have to pay the $800 per year in franchise taxes, so if you're just looking to hold and protect assets the DST is preferable since it is infinitely expandable because it contains a "series" function, is anonymous, and also is a Trust that avoids the Franchise tax