Living in CA, investing out of state. Where to form LLC?
I think I have a simple enough situation that I won't require advice from a asset protection lawyer, I'm hoping some of you are in a similar situation and can pass on what you have done.
My wife and I live in California. We are under contract for our first investment deal, a multifamily in South Dakota. We have assets outside of this property that we would like to protect, so my plan is to form an LLC for this property and then get umbrella insurance on top of that. The property is over four units, so we're looking at a commercial loan regardless. The lender has no issue with an LLC holding the property.
I know California is going to consider us "doing business in California" and therefore subject to the $800 minimum franchise tax in California. It seems my options are to either form a South Dakota LLC and register it as a foreign company or form a California LLC and register it as foreign company in South Dakota.
My questions:
- The LLC operating agreement can be simple, my wife and I will be the only members. Can someone share a sample simple operating agreement for this "married couple holding a single property" LLC?
- What are the pros and cons of forming the LLC in CA vs where the property is? The typical advice for RE investors is to form in the state where the property is because it avoids the overhead of having to register a foreign corporation where you are doing business. But since we are CA residents, we have that overhead regardless.
- California is a community property state, South Dakota is not. If we form a South Dakota LLC, can we still treat it as a disregarded entity because we live in California?
Thanks in advance!