LLC questions: CA resident purchasing in MO
Lawrence CargnoniPro Member
SAN JOSE, CA - California · Member since 2014 · 9 posts · 3 votesLLC questions: CA resident purchasing in MO
9 Replies
- 11moRicardo R.Pro MemberProperty Manager · Michigan Ctr, MI · Member since 2016 · 661 posts · 581 votes
Hey Larry,
Totally get where you're coming from — the whole "California resident investing out of state with an LLC" thing gets messy fast. You're not overthinking it; these little details really do matter once you start adding states into the mix.
Here’s how I’d break it down without all the legal fluff:
Option 1 – Use your current Ohio LLC (that’s registered in CA)
You can buy the Missouri property under that LLC, but you'll end up registering it as a foreign LLC in Missouri too. So you’d be paying annual fees in both CA and MO. It’ll work fine, just means more paperwork and duplicate costs.Option 2 – Create a Missouri LLC just for that property
This is what most investors in your shoes do. It keeps things clean, simple, and local — your Missouri property sits in a Missouri LLC, and your Ohio LLC can be used later when you actually buy something there. The downside is you'll still pay CA income tax on the profits (since you live there), but you'd only be paying one state's LLC fee instead of two.Option 3 – The Wyoming holding company route
This one's the "fancy" structure a lot of people pitch for privacy and protection. You'd have a WY LLC own the Missouri LLC. That can work, but if you're still managing everything from California, the state might decide it's "doing business" there anyway and charge you the $800 franchise fee — so it doesn't always dodge the bullet. Plus, it's more complicated when your lender looks at ownership for the DSCR loan.If it were me, I'd just form a Missouri LLC for this property and keep it simple. Once you've got a few more properties under your belt, then you can think about a Wyoming parent company or more complex structure. Lenders like clean, straightforward ownership when you're doing DSCR loans anyway.
So yeah — no wrong answer here, but for a first Missouri deal, I’d go local, stay simple, and keep your sanity. California will still want their tax cut no matter what you do; Larry I really hope this helps you a bit, I sent you a DM on BP... it's one of the reasons I do this, I hope you can assist. Thank you.
- SAN JOSE, CA - California · Member since 2014 · 9 posts · 3 votes11mo
Hello Ricardo, I appreciate the breakdown.
Option 2- would I not have to register that LLC in CA? (just as I did for Ohio LLC)
Option 3 - Ditto - would I not have to register the WY with CA?
LarryC
- 11moRicardo R.Pro MemberProperty Manager · Michigan Ctr, MI · Member since 2016 · 661 posts · 581 votes
@Lawrence Cargnoni, To your questions:
Option 2 (Missouri LLC owned by a Wyoming holding company):
You might avoid registering the Missouri LLC in California if you’re not materially managing it from within the state. But since you’re a California resident — and, as you mentioned before, already had to register your Ohio LLC as a foreign entity in CA because it was managed from there — the same logic would likely apply. California looks at where management and control occur, not just where the property sits. So if you’re signing contracts, handling banking, or directing operations from your home office in San Jose, the Franchise Tax Board will probably say it’s “doing business” in CA again.Option 3 (Wyoming LLC only):
Same issue. Even though Wyoming is great for anonymity and simplicity, if you're actively managing that LLC from California, you're technically doing business there and would have to register it as a foreign LLC.So in short — yes, you’d likely have to register either of those entities in California, just like you did with your Ohio one, unless you set up true out-of-state management (like a Missouri-based property manager or partner handling all the activity).
- 11moAlex BekezaBusiness MemberLender · Los Angeles, CA · Member since 2018 · 2k+ posts · 1k+ votes
@Lawrence Cargnoni I live in California, own 19 units in South City STL, and originate DSCR loans so I'd love to connect. Personally, I have my CA LLC with a Cert of Foreign Qualification from MO. This is definitely the most expensive way to do it with CA's annual fee but I didn't know any better when I first started. The WY parent company route is one I see a lot of people take and I believe you'll just need to pay for a registered agent/place to do business under in WY. LegalZoom or one of those similar services or an attorney specializing in asset protection should be able to walk you through the pros and cons.
Investor Property Loan5306 Reviews - 11moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
My head is spinning after reading your post. The question you should be asking: How do I prevent premises liability claims, avoid construction or title defects, landlord/tenant disputes & payment and performance disputes with contractors/vendors. More than likely if a conflict arises in your real estate business it will be attributable to one of those occurrences.
- SAN JOSE, CA - California · Member since 2014 · 9 posts · 3 votes11moWhich is why I'm reaching out to the experience on BP. I've been also told to "forget LLC's, go conventional mortgages, put each rental in your name, and get buy personal liability insurance that covers all of your personal and rental assets" (which at this point is looking attractive and cheaper)
Quote from @Stuart Udis:
My head is spinning after reading your post. The question you should be asking: How do I prevent premises liability claims, avoid construction or title defects, landlord/tenant disputes & payment and performance disputes with contractors/vendors. More than likely if a conflict arises in your real estate business it will be attributable to one of those occurrences.
- CPA and Attorney · San Diego, attorney · Member since 2022 · 301 posts · 219 votes11mo
California is generally more cumbersome than other states when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will likely be deemed to be "doing business" in California and therefore likely subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you may need to register it as a foreign LLC in California. Though, this process will be the same for the other state (if you created a CA LLC you may need to register it as a foreign LLC in the state in which you are doing business/holding property). This means that you will probably need to pay registration and filing fees in at least 2 states if you don't buy CA property as a CA resident. Recall that most states require you to have an in-state agent for service of process, so each state that you register in could increase annual fees as well.
Be sure to tell your accountant that you may now need to file non-resident income tax returns in each state where you own property as well. CA taxes residents on worldwide income but may provide a credit for taxes paid to other states.
It is possible that the state where the property is located is where lawsuits would be brought if they are something for personal injury like a trip and fall or something of that nature because the “cause of action” arose in that state. So even if you pick a state with stronger protections like WY or NV, the cause of action arose in the state where the tenant fell, so it could be that the court where the accident happened has jurisdiction. Of course, with all things, the answers to all these matters will depend on the circumstances.
California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts. It also is helpful to have a California LLC in case you ever sell that property and move into another state so that you do not need to form a new LLC altogether with new operating agreement, just re-register in the new state as a new foreign LLC. Also, the state of formation is likely where internal disputes would be brought among LLC members, so if you and a partner and/or spouse live in CA, you probably want to arbitrate in CA if the two of you had a disagreement. It may also make it easier for your estate planning attorney to line up ownership with your estate plan, assuming a CA-estate plan if a CA resident. But, that is not always the right answer and you should speak with someone familiar with your personal situation to get advice specific to you.
*This post is informational only and is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client or CPA-client relationship.
- 11moStuart UdisPro MemberAttorney · Philadelphia · Member since 2018 · 2k+ posts · 3k+ votes
Most investors focus almost exclusively on reacting to liability—not preventing it. They set up LLCs and purchase insurance in hopes of being protected when something goes wrong, yet they spend little time identifying the operational risks that are most likely to trigger those liabilities in the first place.
While LLCs are valuable for business structuring and privacy, and insurance is essential, both are frequently misunderstood and improperly utilized. Investors often spend significant money on entities and insurance policies without ever putting in place the systems required to make those protections truly effective.
Real protection begins with understanding where liability most commonly originates in daily operations and proactively implementing contract and risk management systems that shift exposure before a claim ever occurs. This is the foundation I recommend every investor start with—not just preparing for the lawsuit, but preventing the event that causes it. I’ve posted many times about this topic, feel free to review some of my past posts.
- 11moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
You’re asking the right questions. Setting up LLCs across states can get complicated, especially with California in the mix.
From a tax point of view, California looks at where you manage the business, not just where the property is. So even if you form an LLC in Missouri or Wyoming, if you're running things from California, the state will likely want its $800 franchise tax and filing.
Creating a Missouri LLC for the St. Louis property makes sense for liability and local operations. The Wyoming holding company can work if you plan to buy more properties or want privacy, but it won't stop California from taxing the income if you manage it there.
Keep it simple unless you're scaling fast. One clean Missouri LLC and proper accounting will save you headaches and extra filings.
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