Need Advice about LLCs - foreign vs. domestic (CA resident)

[Account Closed]

Hi Everyone! I would appreciate if any accountants, lawyers, etc. can shed some light on the implications that arise from being a CA resident who invests out-of-state through a business entity such as an LLC.

I want to create an LLC to invest in out-of-state multifamily rental properties (to hold for a long period of time, possibly forever). My question stems from the fact that an LLC can be treated as "foreign" or "domestic" depending on where it was created versus where it does business.

Please correct me if I am wrong: In this example, I live in CA but am buying property NOT in California.

If I create a California LLC but purchase property out-of-state (let's say Colorado), I would be operating illegally and be subjugated to the appropriate fines. In order to adhere to the law, I would need to refile my (domestic) California LLC as a foreign LLC operating in Colorado - resulting in double taxation, right?

Related questions:

1. Am I limited to only creating LLCs in the state that I reside in and how does this affect my ability to open business checking/credit accounts with a bank?

2. What is the most effective method to make sure I am following the law as I purchase property that is NOT in California?

To everyone who has read through this far, I appreciate you and am eagerly looking forward to hearing your thoughts!

Thank you!!!

[Todd Rasmussen]

Quote from @Account Closed:

Hi Everyone! I would appreciate if any accountants, lawyers, etc. can shed some light on the implications that arise from being a CA resident who invests out-of-state through a business entity such as an LLC.

I want to create an LLC to invest in out-of-state multifamily rental properties (to hold for a long period of time, possibly forever). My question stems from the fact that an LLC can be treated as "foreign" or "domestic" depending on where it was created versus where it does business.

Please correct me if I am wrong: In this example, I live in CA but am buying property NOT in California.

If I create a California LLC but purchase property out-of-state (let's say Colorado), I would be operating illegally and be subjugated to the appropriate fines. In order to adhere to the law, I would need to refile my (domestic) California LLC as a foreign LLC operating in Colorado - resulting in double taxation, right?

Related questions:

1. Am I limited to only creating LLCs in the state that I reside in and how does this affect my ability to open business checking/credit accounts with a bank?

2. What is the most effective method to make sure I am following the law as I purchase property that is NOT in California?

To everyone who has read through this far, I appreciate you and am eagerly looking forward to hearing your thoughts!

Thank you!!!

Not a lawyer or an accountant, but I am etc.

You can incorporate your LLC in any state regardless of your residence and where your investment properties are located.

Go to the secretary of state's website of where you are purchasing your investments and see what they require (registering your LLC as a foreign entity). Usually its an annual report as a way to collect a fee and then depending on the state, just pay the appropriate taxes.