Forums: Discussions for entrepreneurs and small business.

I am looking to form a LLC and buy some rental properties.  Some have advised forming the LLC in Wyoming or Nevada instead of the state where the property is located which is Arkansas and maybe Missouri

My question is:  1) Do you have to register as a foreign LLC if the property is bought in another state from where the company was formed?  This is stated on many web sites and even on the Arkansas secretary of state website.  Sorta hard to believe that every business is doing this.....maybe they are.

Are the tax benefits and personality liability protection of say Wyoming worth starting a LLC in a different state and having to register, have a registered agent etc in multiple other states?

Thank you for any recommendations.

jb007,

If your property is in Arkansas you should register an LLC for this property and only this property in Arkansas. If you buy more properties in Arkansas have each one owned by a separate LLC. Thats the correct way to do it and here is why:

1) if something happens (a tenant in this property is suing you) and you have this property owned in some LLC with other properties you are exposing those other properties to be affected by the results of the litigation (in other words its a choice of possible loosing one vs. possibly loosing all)

2) if you own all your properties by lets say a Wyoming LLC (which is one of the best states to have your company registered in, but still) you will need to form a Foreign Entity of that LLC in Arkansas. If you do you end up, again, owning all your properties in that state by one entity.

So whats the solution? Have your main "holding" (or "management", if you prefer) company organized in let's say Wyoming, and let this Wyoming company own all of those local LLCs that will hold your investment properties.

Of course, the problem is what if you have 100 properties? Yes, you do need 100 LLC – except in few states that have what is called a Series LLC. Only few states do, those states are Delaware, Nevada, Illinois, Iowa, Tennessee, Oklahoma, Texas, Utah and Wisconsin. When you own properties in those states you can have them all owned by one entity, the series LLC, yet put each one in a separate series, thus protecting each property from the other, while saving money and trouble registering and managing LLC for each one.

Hope thats helpful.

Thanks in advance for any assistance you can give.

Thank you for any recommendations.

I have a few high net- worth friends that use a dual corporation strategy where a Nevada Corporation is used to manage the LLCs across the country for the multiple properties. But if you want to go with this method you will need a CPA to help you with taxes that’s familiar with this strategy. Otherwise real estate inventors will have separate LLCs for each property. This was if something happens on one property, it will not affect the other.  You can check state fees on http://www.myllc.com/real-estate-investors.aspx they vary from state to state.