All Forum Posts by: Susan Wang

I spoke with my lawyer when, I created my LLC. He stated that as long as the LLC was family owned and you only invest in single family properties. Multi-family up to four-plex if you split it up into single units. You would be exempt from the franchise and excise tax. Speak with a RE attorney to be certian.

Here's the thing - CA has a very liberal definition of what "doing business" means and if you are deemed to be doing business in CA, you will be subject to applicable franchise fees. 

So if you have an LLC in another state and no LLC in CA, but you live in CA and operate from your home in CA (or an office or coffee shop or wherever in CA), then you will need to create a foreign entity in CA and pay the $800 minimum franchise fee.

Does everyone do this? No. Should you seek legal counsel if you intend to avoid this? Yes. 

You could potentially avoid this by granting an ownership stake in your LLC to a non-resident of CA (think friends or family). This person would need to be the general partner. You would be a passive partner, basically the money guy. At that point, you're not actually doing business in CA because you're not calling the shots. You would just need to make sure you can actually structure deals and your facts to support that strategy as it can hurt if you're caught red handed.

Hey, fellow Lubbockite! 

We went with an asset protection firm that charges one upfront fee with unlimited LLCs. There is a small monthly agent fee for out-of-state LLCs though. Each individual LLC is a "disregarded entity" that holds each property and reports up the holding company, which reports up to the trust (for anonymity). I know some people think one LLC per property is overkill, BUT you can transfer the LLC to another investor purchasing inside an LLC, thus avoiding closing costs and the 2 year seasoning period.

At least, that’s how it was described to me; I’m excited to give it a try. :)

Ryan, I am 99% sure you will need to go commercial; I dealt with a similar transition a few years back.  

Interesting thread.  One area where I think RE investors (or any business owner) would benefit is with integrated legal, asset protection and tax strategy/accounting team.  IMO, there are not enough firms on both the CPA and/or legal side that attempt to integrate these (through strategic partnerships).  Our firm went all in with a lawyer to integrate our client strategies and it has made 1) Our clients' lives easier 2) Legal compliance easier 3) Tax strategy bulletproof and consistent. There is no second guessing as all parties are on the same page and we feel our tax strategies are properly documented and some cases, maintained by our legal partner consistently and effectively. 

We found for years that a client would come in with sometimes conflicting or inconsistent advice because the lawyers don't focus on tax planning and the CPAs don't focus on asset protection. By combining the two (albeit at a premium usually), your overall planning should have a much higher ROI and you'll know that your asset protection and tax strategy mesh correctly.