Foreign LLC in Arizona - bad idea?

[Greg Benoit]

Hello all,

My partner and I are looking to buy a rental property in Arizona. We've been researching options for setting up the LLC. One of the options we looked at was registering in one of the "business-friendly" states, like Nevada or Wyoming, and then registering as a foreign LLC in AZ. (Both of us live outside of AZ, one in New York State and one in Maryland.) But after reading up on this idea (including several posts on this site), this doesn't seem like a sensible option. I was hoping to get a sanity check from you folks on this. Here's how I understand it:

- Legal: Regardless of where we registered the business, if we were to get sued by a tenant in AZ, we'd still be going to court in AZ and dealing with the AZ laws governing liability. Therefore, the "business-friendly" legal system in the registered state wouldn't have any bearing on the case. Is that right?

- Taxes: Our "nexus" would still be in Arizona, therefore we'd be liable for whatever taxes in AZ anyway, and perhaps in the registered state as well.

- Administrative: We'd essentially just be adding whatever paperwork and fees required by the registered state on top of what we'd have to file in AZ anyway to maintain the foreign entity.

Does all of this sound right? Am I missing anything? If not, I can't see how setting things up this way would offer any advantages.

Thanks,

- Greg