Where to form LLC and how to register in a foreign state?

Question

Hey everyone,

I'm looking at using Northwestern Registered Agent to start an LLC to do business in the Southeast, but wondering where I should start the LLC. I see a lot of people start it in Wyoming, Nevada or Delaware, but then how do I register it in the new state? Any advice appreciated.

Thanks!

Sean Osch · Answer

Thanks @David M.- that makes sense. I have read that compliance can be tricky in some states and that business loans are different than personal loans, but the details of that are still opaque to me. I think it would be worth the cost for the privacy as long as I actually scale up to 4-5 properties in the long run.

David M. · Answer

@Sean Osch

Sure if thats what you want.  I don't think its the registered agent service as much as the state policy of not giving out the owner's name.  Just realize that you need to operate it properly to maintain that anonymity.  Also, you need to operate the LLC properly, as well, to maintain the limited liability protection if you want that too.  One of the big sticking points for most people is that they need to use non-residential financing since LLC's are not eligble for conforming residential loans.  Bottom line:  there are additional costs to this and so the old adage of you pay for what you get still applies.

Sean Osch · Answer

Thanks! Yes, I noticed a lot of people said that the insurance policy was more important than the LLC, and that an umbrella policy was not generally needed when starting out, but provided extra protection. But the LLC, if you use a registered agent, can help provide privacy from what I've read on the forums.

David M. · Answer

@Sean Osch

Yeah, I usually hear about starting in WY or DE because of the anonymity.  Those states won't let people find out who is the owner of the LLC.

From there, you normally want a LLC formed in the state that the property resides this way it will have legal standing in that state if you need to go to court.  So, you would either form another LLC in that target state with the WY or DE LLC being the member (in LLC's the "member" is the owner).  Or, you can register your current WY or DE LLC as a foreign entity in the other state.  Remember, LLC's are formed by state, so registering in another state its actually "foreign."  As "warm-blooded" persons we have standing across the USA...

I believe its generally better to form another LLC.  It maintains the anonymity, and I think its suposed to be cleaner, legally.  In terms of forming, registering, or structuring your LLC's of course consult a qualified professional...  But, to shed some light on the process, many states you can co online and form the LLC and you would just select forming a new LLC or registering an existing LLC as a foreign entity.  In NJ, its take about 5min and the regisration fee which you can pay by credit card.  Of course, you need a qualified professional to help you with the Operating Agreement.

All, that being said, we have tons of threads on the boards about the value of investing with a LLC.  Its really not always necessary especially when startging out.  Unless you are investing with a non-spousal partner or in commercial property where the risks are different.

I hope this helps.  Good luck.