Nevada LLC for California investor with properties outside CA

[Eishay Smith]

Hi,

I live in California and have few properties in Texas, planning to invest in other states as well.
I would like to create an LLC for the properties. Creating one in CA is expensive ($800 franchise tax/year) and has less asset protection (piercing the veil in CA is common). On the other hand, according to Legal Ruling 2011-01 of CA, if I manage an foreign LLC I must register it at CA and thus loose the benefits of say Nevada LLC.
""If the activities of A or B constitute "doing business" in California, X and Y are also "doing business" in California due to their ownership of the disregarded entities. As a result of "doing business" in California, X and Y have substantial nexus with California.""

I heard that there's an option of creating a CA partnership to own the LLC, but my CPA is not sure its going to work.

Any recommendations?

Thanks,
Eishay

[Mitch Kronowit]

Originally posted by Eishay Smith:

http://www.corporateservicecenter.com/nevada-california-comparison.html
quote:
Regarding California's position on limited liability, Robert B. Thompson wrote in Piercing the Corporate Veil: An Empirical Study (76 Cornell L. Rev. 1036, 1052 (1991)) that "a perception [exists] that public policy in California favor[s] piercing the corporate veil." According to Thompson's study, among the states with the largest number of reported veil piercing decisions, California courts pierce the corporate veil at the highest rate - 45% of attempted veil piercing cases in California are successful.

Here's the "Rest of the Story". What your Nevada-based entity formation company above failed to mention was Robert Thompson's report (20 years old by the way) found the national average for veil-piercing was just a little above 40%, not that far away from the California rate. In addition, cases where the court set aside the entity were largely rooted in instances of fraud and were dominated by contract law disputes, not torts.

Lastly, the Corporate Service Center you quoted actually LIED about the highest rate. Montana and Tennessee had veil piercing rates in the 68% range with North and South Dakota in the 80's!!!! Now, reasons for why some rates were higher than others were difficult to determine. One reason cited California's liberal political climate as a reason for its 45% rate, however, that doesn't explain the exceptionally high rates in "Red" states such as Montana, Tennessee, and the Dakotas mentioned above. Perhaps the reason has more to do with the TYPE of people forming these entities and not the STATE where they were formed.

Because Kansas has a much lower automobile accident rate than Massachusetts, are we to conclude the drivers in Kansas own better cars?

http://works.bepress.com/cgi/viewcontent.cgi?article=1008&context=peteroh&sei-redir=1&