Where to setup LLC (can you setup outside state of property)

Question

Hi BP Community,

was wondering if anyone has expertise on this, where is the best state to setup an LLC for an investment property? I just saw a youtube video claiming that if you don"t set it up in the state of the property then you wont be able to do evict a tenant in that state with an out of town LLC. does anyone know if that is true?

Natalie Kolodij · Answer

You typically want the LLC where the asset/business is LLC's are a state specific item- so having it where it needs to funciton will likely offer you the best protections

Consult with an attorney

Basit Siddiqi · Answer

@Naftali GreenYou normally want to set up an LLC in the state where your property is located in. This will reduce the overhead costs of LLC annual fees / registered agent fees.The more states involved, the higher the annual LLC fees / registered agent fees. It also is more administratively burdensome to have more paperwork. When you have more assets or a larger company, states like Delaware, Nevada, Wyoming may make sense if you are looking for charging order protection, anonymity, business friendly case law, etc.

Tuli Green · Answer

@Jerry W. Thank you

Jerry W. · Answer

@Naftali Green, actually the information about not being able to evict someone might be true.  If you have not registered an entity in the state where you buy property most states will not allow your company to enter an appearance in court.  Furthermore they can often serve the Secretary of state and not your out of state registered agent and then get a default judgement against you.  I have researched a few states and found this true in each one.  I know most states require you to have a registered agent who resides in the state before you can legally do business in that state.  Not giving you standing in court is a method of forcing folks to follow the rules.  However someone would most likely need to challenge your status of not being registered to get to claim it.  It literally takes less than a minute to check to see if your company is registered however.

Tuli Green · Answer

Thank you good to know

Scott M. · Answer

The answer to the last question is not true.  If you open one up in a state that is different from the state the property is in you need to register the llc with the state the property is in as a foreign business.  This isn't for eviction purpose, this is for tax purposes so the state the property is in can properly tax you.

Does everyone follow that rule?  Nope. But that is a rule.

Where to setup LLC (can you setup outside state of property)

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