All Forum Posts by: Megan Templeton

Being a California resident can be a trick when navigating LLCs with due to the franchise tax. While using an LLC or Corp to own propertly remotely wouldnt require a foregin filing in the state of the property (property can be held remotely without needing a foregin filing as its not "doing business" in the state), the issue you will run into with an LLC or corporation in CA is the yearly fee. From the CPAs we work with, just being a CA resident puts you at risk of an entity, other than trust, being subject to the franchise tax. To avoid the yearly fee, we recommend using a DST. It avoids the CA franchise tax, is scalable so you can add multiple assets under it while benefiting from the liability minimixation structure of child series' , and it can streamline your operations by using one set of books, bank account, etc. The DST can minimize liability by having each property in its own child series, streamline your operations, and minimize taxes.

If you dont want to set up an LLC to hold title to your property, I would still recommend an LLC for your operations. This would be a shell LLC only used to interact with third partties such as tenants, contrators, PMs, etc. If so, I would recommend a business checking account but keep the balance low (distribute excess proceeds to yourself). Any nationally chartered bank should be able to assist. Your financial accounts don't have to be at the same bank. I would love to chat more if you interested. Feel free to connect with me.

I would recommend you check with their SDIRA provider on this one as they will be able to advise on the process

Hi there! I would recommend an LLC to hold the ADU. Stats say that if you are an investor for more than 10+ years, you have a 90% chance of being sued at some point. For long term investors, its not so mcuh of if you will be sued, but when. While insurance is a good first line of defense, it is not conclusive. Insurance companies are a business and inside of that looking to mitigate costs. In doing so, they will often find reasons to not pay out on a claim. If thats the case for you, you want a true line of defense in a lawsuit - thats where an LLC comes in. An LLC separates you from your business so that if your are sued, your personal assets arent at risk. Using an LLC not only provides liability protection but can open up opportunities for you for working with 3rd parties such as lenders or partners who require an LLC. If your LLC is set up correctly, the operations and financial pieces of it can be minimal and easy to manage.

Hi there! I would recommend going ahead and getting the LLC in place and closing into the LLC if possible - this will be dependent on how soon closing is, if there is lending involved, etc. By seting up the LLC initially and taking title direclty into the LLC, you will limit issues that could come up during the licensing application process and ensure you are protected from the start.

I would not recommend doing this. It limits your options to actions you can take as the landlord if the true resident (the individual) is not listed on the lease.

@Robert Leitner No problem. I would be happy to chat with you if you would like some assistance. Feel free to connect with me! Best of luck. 

Being a California resident can be a trick when navigating LLCs with due to the franchise tax. While using an LLC or Corp to own propertly remotely wouldnt require a foregin filing in the state of the property (property can be held remotely without needing a foregin filing as its not "doing business" in the state), the issue you will run into with an LLC or corporation in CA is the yearly fee. From the CPAs we work with, just being a CA resident puts you at risk of an entity, other than trust, being subject to the franchise tax. To avoid the yearly fee, we recommend using a DST. It avoids the CA franchise tax, is scalable so you can add multiple assets under it while benefiting from the liability minimixation structure of child series' , and it can streamline your operations by using one set of books, bank account, etc. The DST can minimize liability by having each property in its own child series, streamline your operations, and minimize taxes.

Hi there! Ultimately I do recommend housing the properties in a holding LLC (a series LLC is a great option) to remove liability but, if you are looking to have a minimal setup, an LLC just for operations is a moderate solution. I recommend a dual LLC set up - one LLC to hold your asset (or multiple LLCs or a series if you have multiple assets) and an operations LLC. The operations LLC piece is the side you are looking at now. By having the operations LLC, you remove yourself from the contacting and public facing activities. If someone is going to litigate, they will litgate initially against the party they are contracted with - the operations co. Its a great first line of defense but ultimately not bulletproof as the litigant can also try to pursue the home owner - if the home is not housed in an entity, you are exposed personally. Additionally, insurance provides a layer or protection but you run the risk of the policy not paying out or the damages exceeding your policy. Using an operations LLC doesn't require retitling properties or moertgages - it would simply require an agreement between your operations LLC and each property to formalize the PM relationship. The LLC can be in one state - I would recommend your state of residence. If you decide to take in state action such as an eviction, you would then need to register the LLC in the state of the property. ITs important to note that your operations LLC could only manage YOUR properties - PM companies that manage properties for others are subject to additional requirements.

Hi there! Stats say that if you are an investor for more than 10+ years, you have a 90% chance of being sued at some point. For long term investors, its not so mcuh of if you will be sued, but when. While insurance is a good first line of defense, it is not conclusive. Insurance companies are a business and inside of that looking to mitigate costs. In doing so, they will often find reasons to not pay out on a claim. If thats the case for you, you want a true line of defense in a lawsuit - thats where an LLC comes in. An LLC separates you from your business so that if your are sued, your personal assets arent at risk. Using an LLC not only provides liability protection but can open up opportunities for you for working with 3rd parties such as lenders or partners who require an LLC. If your LLC is set up correctly, the operations and financial pieces of it can be minimal and easy to manage.