Started LLC out of state, reconsidering that decision, now what?

[Lauren Kail]

I started a single member LLC in Utah upon recommendation very early in my real estate journey, probably sooner than I should have. I'm finally going to be "doing business" and purchasing a property to hold this year in Alabama. It is time for my annual renewal in Utah plus Registered Agent fee, and I'm trying to determine if it is a good idea to renew in Utah and register as a foreign entity here in AL when the time comes, or if I should just dissolve it and start a new domestic entity in AL. My concern is multiple state filing fees, multiple returns, etc.

Any advice from a CPA, RE Attorney, or fellow LLC owner would be so much appreciated! Thanks, folks!

[Peter McDonough]

Get rid of it, and replace with an umbrella insurance policy.

Your single member LLC will not provide asset protection. It's pretty easy to pierce the corporate veil and go after your personal assets. Additionally, the LLC ownership of your rental property will increase the lending and reserve requirements for the property, meaning the investment will be less profitable, while filing the additional tax return for the LLC and ensuring the LLC has adequate cash flow to stay solvent while simultaneously trying to not intermingle personal and LLC funds to uphold the asset protecting capability of the LLC is a whole lot of hassle. The umbrella policy is a couple hundred bucks, and if you get sued, the insurance company is incentivized to hire a lawyer to protect you and keep them from having to pay out a large settlement.