Posted by David Krulac on October 05, 2004 at 10:19:02:
you need to know the tax law in each of the states where you are working. Some states won’t have you pay taxes in a state that you don’t reside. Other states will and a third group like NV does not have a state income tax. For my nickle I don’t want to be filing tax returns and a bunch of paperwork in a dozen states, to me the overhead is too much.
Investors who use LLC or Corp. - Posted by Chris (CA)
Posted by Chris (CA) on October 04, 2004 at 20:24:31:
I live in California and planned on forming a Nevada LLC for investing in RE. My plan is to rehab using hard money, then refi to hold long term. I plan on investing in any state where there is a deal. My question is this…Are there any investors who have a business entity set up in a non home state, but do business in their home state. Example, I planned on forming a Nevada LLC, but would do a deal in California if it came my way. I’m sure there are plenty of you, so I’m wondering if you have registered that business entity in every state where you do business? In my example If I had a Nevada entity that did a RE deal in California then I would have to register that entity in California which means that I would have to pay $800 to the Franchise Tax Board. According to this http://www.nvinc.com/will_your_nevada_corporation.htm I would have to register a foreign LLC in every state that I did a deal in. I’m all for being within compliance of the law, but that seems like a pain in the you know what. So with that said, I’m really curious to see how others are doing it. According to that link, some states impose a heavy fine if you get caught. One, I believe in CA, even makes you guilty of a misdemeanor. Please share your experiences.
Thanks,
Chris
Re: Investors who use LLC or Corp. - Posted by Rocco
Posted by Rocco on October 06, 2004 at 08:55:11:
Chris…I think the correct answer to your question is yes. You need a foriegn registration in each state in which you are doing business. I have a NV LLC with registrations in two other states. One in my home state to establish a business checking account and the other in the the state where my properties are. Now I’ve moved to the second state and will disolve the foreign reg in the first state since I am paying $300 per year to maintain it. I have no income from RE in that state anyway.
There may be other ways of doing things…you should speak with your lawyer.
Re: Investors who use LLC or Corp. - Posted by Del-Ohio
Posted by Del-Ohio on October 05, 2004 at 16:22:55:
I have sat through a lot of lectures, seminars and boot camps RE assett and assett protection and entity structure.
A couple conclusions I have come to.
To a person whose only, or main, tool is a hammer everything looks like a nail.
I would chose entity structures and locations only from someone who isnt selling me a structure, but can look at where I am, what I am planning to do and then design the best structure assett protection plan.
Before making a definite decision on Nevada Corps, I would highly reccomend sitting through a one day seminar with John Hyre the real estate investor investor, attorney, CPA. I found it very enlightning after sitting through a lot of entity structure assett protection seminars.
At the least he is an entertaining speaker and he wont try to sell you a boot camp. Actually buying an hour of his phone consult time for $250 may be the best money spend.
You can look him up by typing John Hyre real estate accountant attorney in any search engine.
Best of success to you
Del-Ohio
Re: Investors who use LLC or Corp. - Posted by E.Eka
Posted by E.Eka on October 05, 2004 at 11:41:22:
Can you tell me what the advantages of registering your company in Nevada would be? It’s a rhetorical question. You’ll probably say that it’s tax free. Then I’ll tell you that you’re partly wrong. It’s only tax free from a state perspective if and only if you operate in Nevada. LLC and Corp have different state statutes as well. From a federal stand point, it’s moot because you’ll pay taxes on the LLC’s profits on your 1040, as it is a pass through entity. Corporations are a little different.
CA like to tax the heck out of things, people everyone. The point is, if you establish nexus in California, YOU WILL PAY TAXES, either franchise or income or BOTH. Nexus can be established by physical presence, having sales, payroll, or property in the state. Each state wants their piece of the pie and as a result they’ll go after you for money they MAY feel they are owed. If you operate in every state, you may have to register in every state. It all depends on the particular statutes of that state.
If you’re trying to set up a legitimate business, it’s important to set it up legitimately. The last thing you need is to be fighting with the tax men of a state because you cut some corners or your skipped a few steps.
Re: Investors who use LLC or Corp. - Posted by domineaux_TX
Posted by domineaux_TX on October 05, 2004 at 08:39:57:
In most states you cannot use the courts unless you are incorporated in that state. So, if you need to use the courts you may wish you had incorporated in the state you did business.
This won’t mean much until it does LOL
Re: Investors who use LLC or Corp. - Posted by David Krulac
Posted by David Krulac on October 05, 2004 at 06:32:36:
if you’re paying the CA fee why don’t you set up the LLC in CA? For any profits made in CA you will owe income tax AND CA will also want income tax for profits made outside of CA, if you live in CA and file your taxes there. IMHO in general its best to be incorporated/LLCed in the state where you are doing business.
Re: Investors who use LLC or Corp. - Posted by Chris (CA)
Posted by Chris (CA) on October 06, 2004 at 18:59:18:
Thank you Rocco for sharing the way you have your business set up. I figured this is what must be done regardless of the associated pain. I’ve read so much about corp. versus LLC, but nobody says whatever entity you chose you need to set it up in every state you have property in. I guess it’s one of those assumed things. Thanks again to everyone for posting their input and experiences. This board is a great resource, thanks to everyone who contributes.
Much success,
Chris
Re: Investors who use LLC or Corp. - Posted by Chris (CA)
Posted by Chris (CA) on October 05, 2004 at 15:29:21:
Thanks for the reply. My reason for Nevada has nothing to do with taxes. It has everything to do with corporate veil and personal protection. I want to make sure that I have the most protection if someone attempts litigation beyond my business entity. Nevada seems to be, in my opinion, a pro-business state and that makes me feel comfortable. California to me seems to be all about the money, and that doesn’t leave me feeling very comfortable. So how have you structured your business entity? Where do you invest, and do you have entities in each state?
Re: Investors who use LLC or Corp. - Posted by Larry in Florida
Posted by Larry in Florida on October 05, 2004 at 14:44:30:
So, incorporate in CA, set up an LLC in Nevada, have the CA corp go to Nevada and borrow money from the Nevada LLC. There is no usury rate in Nevada for business loans if I rembember correctly. And it is amazing how difficult it is to make a profit in CA when you have to pay so much interest on your loans.
Re: Investors who use LLC or Corp. - Posted by Chris (CA)
Posted by Chris (CA) on October 05, 2004 at 08:20:17:
Thanks for the reply David. I prefer Nevada over California when forming an LLC. My question wasn’t which state I should chose to form the entity. You stated that it is best to LLC/Inc in the state where you are doing business, and my question relates more to that statement. Are other investors registering their LLC/Corp. in every state they do business? So if you have a rental in New York, Arizona, and Oregon are you registering your LLC/Corp in New York, Arizona, and Oregon?