Arizona LLC, Wyoming holding company, California resident

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Arizona LLC, Wyoming holding company, California resident

Kevin Gillies
Tujunga, CA · Member since 2015 · 2 posts · 0 votes

I have 4 short-term rental properties in Arizona, I live in California. Looking to put them in LLC for asset protection and have Wyoming holding company. The question is do I do have 1 AZ LLC Or separate them. Then have the Wyoming company hold them. Do I need an EIN for the Wyoming LLC? Does it need to qualify to do business in CA? Does qualifying In CA lose my anonymity and protection? Or is there a better way?

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  • Ashish AcharyaBusiness Member
    CPA, CFP®, PFS · Sarasota, FL · Member since 2017 · 5k+ posts · 3k+ votes
    5y
    Originally posted by @Kevin Gillies:

    I have 4 short-term rental properties in Arizona, I live in California. Looking to put them in LLC for asset protection and have Wyoming holding company. The question is do I do have 1 AZ LLC Or separate them. Then have the Wyoming company hold them. Do I need an EIN for the Wyoming LLC? Does it need to qualify to do business in CA? Does qualifying In CA lose my anonymity and protection? Or is there a better way?

    I am going to answer the tax aspect of this question. 

    Since AZ doesn't have the LLC-level fees/taxes, you can create multiple SMLLC for each property. In states that have entity-level LLC, the structuring needs to be changed to optimize the entity-level fees/taxes. You have to pay $45 per entity as annual report fees. (CA is different on this - see below) So the question should be: do you need different LLCs for legal reasons?

    If WY LLC is also 100% owned by you, you dont need EIN unless you hire employees.

    Since you are the sole managing member of the WY LLC, you will be considered doing business in CA for tax reasons. You will see some tax professional saying you need to pay 800 fees for all 5 LLCs five times. I have a different approach if you can structure your agreement in a certain way as do not like my client paying 800 for each LLC. If you want to take the more conservative approach, get one AZ LLC to save 800 for each LLC.

    Depending on your future journey in real estate, it might also benefit from forming Sereis LLC at holding level.

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  • Kevin Gillies
    OP
    Tujunga, CA · Member since 2015 · 2 posts · 0 votes
    5y

    Thanks, Ashish

    The main purpose is to get the properties out of my name, to separate the Short term rentals from myself. (asset protection)

    From further research, it sounds like the WY LLC that is actually doing business (Holding a Bank account, receiving money for the AZ LLC activity) should register as a foreign LLC doing business in CA. Since the AZ LLC are disregarded LLC strictly for holding the properties there would be no need to pay the CA 800.00 tax for the AZ LLCs. Does that sound correct?

    Not sure how forming Sereis LLC at the holding level works or how it's structured. The future would be to keep adding properties to the to existing LLCs within the WY LLC.


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  • Tim Winter
    Broker · Phoenix, AZ · Member since 2015 · 151 posts · 55 votes
    5y

    It sounds like you need an estate planner roadmap for holding.

    It really all depends on your financial situation and equity positions in each, and your risk aversion. For myself I prefer keeping leverage on my properties for asset protection, and growing the portfolio by working and reworking the equity every year, but you maybe in a different point in your real estate journey that you are looking for protection and cash flow rather than growth.

    There are estate planners that can walk you through what entity structures best fit your financial and business situation. I've seen some mind blowing maps to protect multi million dollar estates, and also easy two entity structures that were enough protection.  

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