CA Resident owning OOS income properties-How to structure entity?

[Keong Kam]

Hello! A question for fellow BP investors!

I am a CA resident and trying to create an LLC to protect my assets in Missouri.

My CPA says I need to create a CA LLC and then register in MO, then transfer MO properties into the LLC.

So,  basically:

1. To create an LLC in CA, there is some fee for this.

2. To register in MO as foreign LLC operating in state, there is fee for this

3. Then there is annual fee to maintain CA LLC and probably also to foreign LLC registration in MO?

4. CA LLC has min $800 franchise tax?

5. My CPA also says CA state taxes on my income from MO LLC for the portion of the difference between MO and CA state tax.

????????????

Seems like cost could quickly mount up!

How are other CA investors with OOS properties structuring the entities? 

I am searching around for real estate/tax attorneys to consult on this, but would really appreciate if someone can share what's working for them.

Thanks-

[P.J. Bremner]

@Keong Kam

I heard the exact same thing from my CPA, so I decided to go the Umbrella Insurance Policy route rather than LLC route. It may make sense to go the LLC when you start to get assets in the several millions, then the $800 is a negligible expense.

For now, I make sure all of the homeowner insurance on these properties have good coverage (I like minimum $500k liability) plus a couple million on the umbrella.  My personal umbrella covers about 5 properties, my cars, etc. and the premium is like $400 per year If i recall.  

My personal opinion is that I would rather a lawsuit take my insurance premium a little higher rather than losing everything in the LLC. I've also heard from some that out of state LLCs MAY not protect you in some instances. I'm not a lawyer, I heard this from other lawyers, so take it with a grain of salt. I would love to get some lawyers perspectives on this though.