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CA LLC vs. DE LLC

Asked by: Joe - 26 December, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/default.png-f1597c1da25f30f8c1a941405e8391c8 I have a Delaware LLC that ownes 8 properties in California. If I change to a California LLC it would be more trouble to manage and give reports and more fees. What are the benefits changing to a CA LLC?
Answered by: Alec Green - 26 December, 2011
https://d25eic0jctudgb.cloudfront.net/images/site/avatars/2.jpg-d85fc946de818bb769fdd6ce8cd95478 Joe,

First of all lets talk about owning properties in California using entities formed in other states. We already covered the question of owning real estate in California with Wyoming LLC, and the approach is same for Delaware LLCs (or any other state for that matter).

Typically when owning a property in California using a non-domestic LLC (that is an LLC registered outside of the state of California) in most cases you would need to register that LLC in California as a foreign entity (a process also called "foreign qualification"). Because foreign entities are subject to similar treatment as far as taxes, fees, and reporting goes, it is often reasonable to simply form a new domestic LLC in California to hold the property.

Now to the point of owning more than one property by one LLC: in the world of real estate investment it is a common practice to hold only one property in an LLC. The reason for that is to protect each property from any form of liability caused by other properties.

To sum up, in your case it could probably be technically sound to form 8 CA LLCs and "move" each of the properties into its own LLC. Of course you would need to consider the costs of formation and maintenance of those LLCs, which in California come up to real money.

I hope that answer gives you enough food for thought, however I do strongly advise you to consult an attorney who can help you choose the best strategy based on your particular case.

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