Must a LLC be based in Philly to own rental properties there?

13 Replies

Hi I'm based in Jersey working on first out of state LLC investment in Philly. Didn't think where LLC is based could have an impact on owning rentals in Philly. Another investor friend suggested that the LLC should be based in Philly. I always thought LLC passes through to its Members, there will be taxes for Philly etc. Anyone has experience in this area?

I would've posed this question to my tax accountant. But she decided to move onto other ventures. So I'm in the process of finding an accountant, to complicate things. 

Thank you very much!

Hi @Kathryn S.

I know that if your LLC is registered outside of Pennsylvania, then you will need to register as a Foreign Entity in PA to conduct business there. However, I've never heard of any law that requires an LLC to be based in Philadelphia in order to own property in Philadelphia. I can't imagine that this is the case, but I could be wrong. You could contact L&I to ask any questions you have about laws for rental properties in Philly.

Thank you Michael. I know PA government does not require the LLC to be formed in PA. Just wondering the pros and cons of forming the LLC in Philly vs NJ. The tax impact should be the same no given that this is a LLC? Thank you

Originally posted by @Kathryn S. :

Thank you Michael. I know PA government does not require the LLC to be formed in PA. Just wondering the pros and cons of forming the LLC in Philly vs NJ. The tax impact should be the same no given that this is a LLC? Thank you

I'm not a CPA but yes the taxation is similar. The main difference is cost. Annual dues for an LLC in PA is one of the lowest in the nation at $70 every 10 years. Annual dues for an LLC in NJ is $75/year. Both cost $125 upfront. 

 

Philly does require an ‘agent’ to have a Philadelphia address. That can be the landlord or someone designated who has a philly address (and not a P.O. Box)

Keep that in mind if you use a lawyer or someone as your designated agent on the LLC.

@Kathryn S.

Note that you don't open an LLC at a city level. So your question is whether to open a PA or NJ LLC.

For various reasons, I generally prefer to have the real-estate-holding LLC to be incorporated in the same state as the property itself. But you could own it as an NJ LLC if you prefer.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.

@Kathryn S.

I would also register up the LLC in PA instead of NJ.
I think it would be overall less fees in this scenario.

Also from a tax standpoint. You would be filing a NJ return, a PA return and potentially a Philadelphia return.
This would be regardless of where you register the LLC.

@Chris K. created the PA LLC I use for my property management company, here in Philadelphia. It wasn't expensive and I couldn't be happier. Regarding the requirement that you must have an agent named that resides within city limits, this is true; but that individual doesn't need to be paid, nor licensed. it can be a cousin, or a neighbor.

Creating an LLC in a different state than the one that the property is in will sometimes make it a bit hard to do things like evicting a tenant.

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