Out of state LLC licenses to operate in NV
Most Popular Reply
Las Vegas, NV · Member since 2016 · 73 posts · 28 votes
9yHi, Vu!
Welcome to Bigger Pockets - and to Real Estate Investing in Cali-vada!
You note that you are interested in Reno - but, Las Vegas is only 5 hours away from Fountain Valley by car - consider the 2 million pop. center versus the (admittedly growing) half-mill Reno Area (it is 'the Biggest LITTLE City in America' for a reason).
I am very encouraged that you are first discussing the legal form of your investing entity, as this is the foundation that must be solid for your business success. However, you should note that the path you are contemplating (a CA LLC + whatever it takes for it to do business in Nevada) may be needlessly expensive.
But, before you contact the Nevada Secretary of State, as Michael and Bill advise above, with the questions you may have now - please get for yourself the information you need to be able to ask the questions you will have after you study it - from a relevant knowledge base. Then address Michael's and Bill's excellent points!
Now THE FOLLOWING NOT LEGAL ADVICE! I am not a lawyer and I do not play one on TV. This is management information, only. Please seek competent legal counsel before acting on it or any other such suggestions you may read here or elsewhere.
Getting appropriate information you need is not really that hard. Just go to its official source (the relevant law) and then, after you have made your business/management decision on the best direction for you, get appropriate counsel from competent legal professionals. Do it in that order, though, or the lawyers will make you do their idea of what is right for you. Be open to their suggestions on any change in direction and the reasons for these that they may have - but, stay in control! Thoroughly understand what they are suggesting and why it really is best - for your business, your goals for your business, and your reasons for being in business. After all, it is your business - not theirs.
So, start your pursuit of relevant knowledge by Googling: NRS 86 (Nevada's LLC law), the California Revised Uniform Limited Liability Company Act, and the California Franchise Tax Board (navigating the sites you select to find the requirements of the law on how LLCs are treated, taxed, and charged fees for earnings and 'doing business' within and outside of the state of their formation and operation). Thoroughly read the '.gov' sites on the first google-response pages you get with each of these search terms. You will find that:
If you set up a CA LLC, you will have to pay all of the fees to set it up and file, get and pay for a registered agent in CA to receive all of your legal papers, warrants, summonses, etc. - i.e., be the 'legal you' in CA - and pay CA taxes (maybe both business and personal taxes - depending on how you elect to have your LLC considered - as a corp or a partnership) on earnings and CA franchise fees for the privilege of doing business in CA whether your LLC earns or does business inside CA or outside of CA.
As you are presently intending to invest in Nevada through an out-of-state entity (your CA LLC), you will have to also register your CA LLC with the NV SOS as a 'foreign' entity and you will have to get and pay for a Nevada registered agent to be the 'legal you' in Nevada. Please note that this foreign registration costs about as much as simply forming a Nevada entity. Also note that Nevada does not have any such Franchise Tax Board or fee for the privilege of doing business here as does CA. We do have business taxes, though - for which your business tax liability kicks in as soon as your entity begins making $4 MILLION a year.
You are already (rightly) contemplating an on-scene, property management company, as the distance from Fountain Valley to either Reno of Las Vegas is probably too great for you to effectively or efficiently perform the necessary day-to-day property management functions. And, of course, with them, you will need a local Power Team of other professionals to advise and do the work they can do better than you can yourself in each of your business' management and operating locations - the one from which you run your business and the one(s) in which you have your property(ies).
But, consider this: unless you have a really good reason to 'manage your investments' from home in Fountain Valley (i.e., 'do business in CA' -- conduct all of your investment mechanics, decisions, actions, etc.) - why not just do these things in Nevada, too - and not pay for your investment management entity set-up and annual maintenance - and your corporate power team twice? ... and not pay the CA FTB franchise fees?
You have to travel to your investment focus area in Nevada (Reno or Las Vegas) for your LLC's REI business reasons anyway -- to learn the investing climate and market there (I would urge you to attend the local REI associations and/or clubs for your investment focus area(s)), to build your local power team, to learn the neighborhoods, examine potential 'next investment' properties, and conduct your due diligence on any property you intend to purchase.
For less than the annual CA franchise fee, you should be able to add the few other top-management actions your REI business needs to these trips - and/or make the few more trips a year (to Las Vegas - a quick, five-hour drive up I-15 with a stop in Baker for lunch at the Mad Greek - or short, cheap flight to Reno) to do everything else you have to do to manage the top-level, non-day-to-day things your business requires - from your phone and laptop on the desk you borrow in your NV resident agent's or your local property manager's, or power team-member realtor's office during business hours. Oh, and wouldn't these top-level, management actions trips (and the Mad Greek lunches - or 'Awful Awful' burgers at Jerry's Nugget in Reno - and other 'reasonable entertainment') also be business expenses?
i would recommend that you (with a competent CA tax attorney who is also licensed to practice and competent as a tax attorney in Nevada) explore simply forming a Nevada LLC and making all of your REI business decisions outside of CA (i.e., so you will not ever be 'doing business in CA' - regardless of where you live).
A Nevada LLC will provide as much - if not more - liability protection as a CA LLC investing in NV would - and perhaps get friendlier treatment than a foreign entity and for far less overhead.
If you continue to live in CA (with its rather high personal income taxes), either the CA or NV LLC can be regarded and taxed as corporations or as pass-through entities - with profit and/or loss coming to you as a 'member' of the LLC - which either is 'doing business in CA' (and subject to the CA FTB fees) - or is NOT 'doing business in CA' (and thus, exempt from the fees of the CA FTB).
I wish you the best of reliably informed and legally advised business acumen - and the business success it will bring, Vu!
11 Replies
- Real Estate Redeveloper · Reno, NV · Member since 2015 · 209 posts · 65 votes9y
I would first contact the Nevada Secretary of State's office and get the answer straight from the source. I can also put you in contact with a Broker who manages property for out of state clients if you wish.
- Palo Alto, CA · Member since 2017 · 226 posts · 95 votes9y
My first thought was that you would need a real estate license. A quick web search didn't turn up a direct link but it did turn up a web posting saying that you need a real estate license:
- 9yBill SchrimpfBusiness MemberReal Estate Agent · Reno, NV · Member since 2014 · 353 posts · 189 votes
Happy Monday @Vu T.
LLC formation is a hot topic for sure. The advice I've received from my attorney and CPA basically say that LLC formation is generally for liability protection. Clearly, everyone circumstances vary and you should discuss with your own legal and financial professionals.
In NV, you can self-manage income properties all day long without a license. If you charge a fee for property management service, you need a Real Estate License with an add-on for property management.
NV silver-flume will encourage LLC formation because they want their fees. Its not necessarily a bad thing but it may not be necessary in your situation.
ERA Realty Central - Bill Schrimpf58 Reviews - Las Vegas, NV · Member since 2016 · 73 posts · 28 votes9y
Hi, Vu!
Welcome to Bigger Pockets - and to Real Estate Investing in Cali-vada!
You note that you are interested in Reno - but, Las Vegas is only 5 hours away from Fountain Valley by car - consider the 2 million pop. center versus the (admittedly growing) half-mill Reno Area (it is 'the Biggest LITTLE City in America' for a reason).
I am very encouraged that you are first discussing the legal form of your investing entity, as this is the foundation that must be solid for your business success. However, you should note that the path you are contemplating (a CA LLC + whatever it takes for it to do business in Nevada) may be needlessly expensive.
But, before you contact the Nevada Secretary of State, as Michael and Bill advise above, with the questions you may have now - please get for yourself the information you need to be able to ask the questions you will have after you study it - from a relevant knowledge base. Then address Michael's and Bill's excellent points!
Now THE FOLLOWING NOT LEGAL ADVICE! I am not a lawyer and I do not play one on TV. This is management information, only. Please seek competent legal counsel before acting on it or any other such suggestions you may read here or elsewhere.
Getting appropriate information you need is not really that hard. Just go to its official source (the relevant law) and then, after you have made your business/management decision on the best direction for you, get appropriate counsel from competent legal professionals. Do it in that order, though, or the lawyers will make you do their idea of what is right for you. Be open to their suggestions on any change in direction and the reasons for these that they may have - but, stay in control! Thoroughly understand what they are suggesting and why it really is best - for your business, your goals for your business, and your reasons for being in business. After all, it is your business - not theirs.
So, start your pursuit of relevant knowledge by Googling: NRS 86 (Nevada's LLC law), the California Revised Uniform Limited Liability Company Act, and the California Franchise Tax Board (navigating the sites you select to find the requirements of the law on how LLCs are treated, taxed, and charged fees for earnings and 'doing business' within and outside of the state of their formation and operation). Thoroughly read the '.gov' sites on the first google-response pages you get with each of these search terms. You will find that:
If you set up a CA LLC, you will have to pay all of the fees to set it up and file, get and pay for a registered agent in CA to receive all of your legal papers, warrants, summonses, etc. - i.e., be the 'legal you' in CA - and pay CA taxes (maybe both business and personal taxes - depending on how you elect to have your LLC considered - as a corp or a partnership) on earnings and CA franchise fees for the privilege of doing business in CA whether your LLC earns or does business inside CA or outside of CA.
As you are presently intending to invest in Nevada through an out-of-state entity (your CA LLC), you will have to also register your CA LLC with the NV SOS as a 'foreign' entity and you will have to get and pay for a Nevada registered agent to be the 'legal you' in Nevada. Please note that this foreign registration costs about as much as simply forming a Nevada entity. Also note that Nevada does not have any such Franchise Tax Board or fee for the privilege of doing business here as does CA. We do have business taxes, though - for which your business tax liability kicks in as soon as your entity begins making $4 MILLION a year.
You are already (rightly) contemplating an on-scene, property management company, as the distance from Fountain Valley to either Reno of Las Vegas is probably too great for you to effectively or efficiently perform the necessary day-to-day property management functions. And, of course, with them, you will need a local Power Team of other professionals to advise and do the work they can do better than you can yourself in each of your business' management and operating locations - the one from which you run your business and the one(s) in which you have your property(ies).
But, consider this: unless you have a really good reason to 'manage your investments' from home in Fountain Valley (i.e., 'do business in CA' -- conduct all of your investment mechanics, decisions, actions, etc.) - why not just do these things in Nevada, too - and not pay for your investment management entity set-up and annual maintenance - and your corporate power team twice? ... and not pay the CA FTB franchise fees?
You have to travel to your investment focus area in Nevada (Reno or Las Vegas) for your LLC's REI business reasons anyway -- to learn the investing climate and market there (I would urge you to attend the local REI associations and/or clubs for your investment focus area(s)), to build your local power team, to learn the neighborhoods, examine potential 'next investment' properties, and conduct your due diligence on any property you intend to purchase.
For less than the annual CA franchise fee, you should be able to add the few other top-management actions your REI business needs to these trips - and/or make the few more trips a year (to Las Vegas - a quick, five-hour drive up I-15 with a stop in Baker for lunch at the Mad Greek - or short, cheap flight to Reno) to do everything else you have to do to manage the top-level, non-day-to-day things your business requires - from your phone and laptop on the desk you borrow in your NV resident agent's or your local property manager's, or power team-member realtor's office during business hours. Oh, and wouldn't these top-level, management actions trips (and the Mad Greek lunches - or 'Awful Awful' burgers at Jerry's Nugget in Reno - and other 'reasonable entertainment') also be business expenses?
i would recommend that you (with a competent CA tax attorney who is also licensed to practice and competent as a tax attorney in Nevada) explore simply forming a Nevada LLC and making all of your REI business decisions outside of CA (i.e., so you will not ever be 'doing business in CA' - regardless of where you live).
A Nevada LLC will provide as much - if not more - liability protection as a CA LLC investing in NV would - and perhaps get friendlier treatment than a foreign entity and for far less overhead.
If you continue to live in CA (with its rather high personal income taxes), either the CA or NV LLC can be regarded and taxed as corporations or as pass-through entities - with profit and/or loss coming to you as a 'member' of the LLC - which either is 'doing business in CA' (and subject to the CA FTB fees) - or is NOT 'doing business in CA' (and thus, exempt from the fees of the CA FTB).
I wish you the best of reliably informed and legally advised business acumen - and the business success it will bring, Vu!
- Las Vegas, NV · Member since 2016 · 73 posts · 28 votes9y
Hey, Vu -- I almost forgot:
Business licenses are the purview of the governing jurisdiction (might be a county - might be a city - 'Reno' contains three such jurisdictions in its effective 'area' and it is nearly impossible to tell by looking whether you are in the City of Reno, the City of Sparks, or the urban area of Washoe County. The 'Las Vegas' area is much simpler - only EIGHT jurisdictions in the effective area - LOL!) - each has its own process, license fee schedule, and tax schedule - and each is different. The purpose of the property's use (a personal residence or a commercial rental) will make a difference, so be specific as to what you want to do with the property when you ask: "I want to buy an SFR and live in it" will get one set of answers. "I want to buy and rent out an SFR" will get another set. "I want to buy a duplex (or 4-plex) and live in one unit and rent out the others" will get yet another set of answers. Be specific.
So ask the question while you are running the numbers on a potential property - but, begin with the question to that jurisdiction about the zoning of the address to see if renting is even allowed at the address you are contemplating.
While you are at it - check out the possible (and the particulars of) any Home Owner's Association that may have control of the address with your Power Team member Realtor (HOAs are, in effect, additional governmental jurisdictions beyond the city or county - each with its own rules, procedures, and 'fee' schedules) - and ask all of those questions all over again of the HOA.
Cheers - Art
@Art Ritter Thanks for the great response!
Since finishing my LLC book and reading up more on the subject, I really do regret starting the LLC in CA. In hindsight forming one in NV would have been a much better deal. Live and learn I guess.
Unfortunately I am stuck in this state for the time being because of work and family. Even If I formed the LLC in NV, I would still have to pay that lovely FTB for the pleasure of "doing business in CA" because I happen to live in CA. Maybe one day I can escape to freedom!
Going from absolute zero business/finance/tax/real estate knowledge - and someone who absolutely hates numbers and paperwork - it's been quite a daunting task these past few weeks to try to absorb all this. I really appreciate all the help and connections I've made on BP!!
- Las Vegas, NV · Member since 2016 · 73 posts · 28 votes9y
Well, @Vu T.
Let's not let all be for naught!
Why not start investing in CA - in an area where you are able to handle the price-points, make a good return, and learn the business?
I am sure that you can find properties that will support your personal purposes and goals for REI in your home state - though maybe not really in or close to Fountain Valley.
I don't know the CA markets; but, I bet that there are other BP readers who do and can make some excellent suggestions.
By starting now, you will be an expert once you do move or start investing out-of state - and if you cash-out when making the jump, you will have a great cash head-start wherever you go!
OK - BP writers: Where should Vu start looking? Southern California? LA area? Imperial Valley? Along the coast? Show him the ... opportunities!
Cheers, Vu! So you got some lemons. Make lemonade!
The CA market is pretty gloom unfortunately. That's pretty much why a lot of people I know that are investing, do it OOS. Even reading BP, that seems to be are recurring theme for us CA people. The price of entry for new players is just too much. I looked at the possibility of getting properties in Sacramento, but not much is exciting. Inventory continues to be insanely low across the board. Anything that is "affordable" are really just located in D-ish neighborhoods up there.
My recent OCREIA meeting pretty much affirms the fact that CA is just a special child when it comes to all this - exceptionally low inventory and exceptionally high demand. If you invest in CA, you are speculating on appreciation more than cash flow.
I mean there are places like Victorville and Barstow that is "affordable" but it isn't exactly a booming city. Just seems like a bad bet for new guys. Maybe when the next quake that hit us, it's just a matter of when at this point, our sky-high prices will come down to earth. Maybe then I will reconsider this state.
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