Which entity structure is the best way to go?

[Quinten Jones]

Good morning everyone, I was up until 2 AM this morning reading various articles on the best type of entity structure for my real estate investing business. From what I have gathered thus far, forming two LLC's to operate the business is the way to go. For example, Investment Company A, LLC to hold all of my Capital Assets that is managed by a seperate Investment Properties B, LLC that would bill Investment Company A for its management services. Additionally, Investment Properties B would lease the Capital Assets of Investment Company A in the name of Investment Properties B, thus therefore putting more of the risk with the Property Management LLC and less risk on the actual Capital Assets contained in the LLC created for holding all properties.

I am concerned with the costs and management of forming different LLCs for each property in California, as California does have the $800 minimum tax. Also, would I have to create another LLC to hold Capital Assets located in Texas, or could those Capital Assets be thrown in the original California LLC and registered in Texas as a Foreign LLC?

Another thought, let's say I did go ahead and group all residential properties within LLC-A, and then formed individual Trusts for Commercial Properties, could each Property Trust then be owned and controlled by the LLC? Anyone have any thoughts on this set-up for my business?

Thanks!!