How to structure your LLCs for real estate & other ventures

[Jonathan James Look]

Hi All,

I want to create an LLC structure for various investment and property holdings. I already have a couple of properties in different states, and I'm also wanting to participate in syndications and other ventures. How have you structured your businesses both from an asset protection and organizational model? And yes, to be discussed further with a lawyer, but even lawyers can have different recommendations.

Currently, I'm thinking one model such as:

- Manager managed LLC holding company

- Member managed LLC per property or portfolio of properties (I know this depends on the investor and their risk tolerance, property type, etc)

- Member managed LLC for syndication deals, etc. Perhaps this should be siloed further per deal? Or does it make more sense to just use the holding company for these types of deals?

Thanks for the help/discussion!

- Jonathan

[Brian Schmelzlen]

Either there is a misunderstanding or the people offering you advice do not understand California tax laws.

Whether an LLC is manager or member managed does not affect whether it is a disregarded entity or not. What controls that is the number of members (owners). If it is a single member LLC, by default it is a disregarded entity in which case it does not file for federal purposes, only state.

California does not care if the LLC is disregarded or not for federal purposes. Either way you will be paying the $800 tax if you are considered to be doing business in California.

Also, it does not matter what state the LLC is formed under if California discovers it and determines that it is doing business in California. The state has determined that if the managing member (including a single member LLC that is managing another LLC) is a California resident, then the LLC is doing business in California.

I hope this helps. I don’t want you to have unexpected tax bills.