Out of state LLC?

[Tim W.]

I need to form a LLC in order to satisfy my lender requirements. The 12 unit apartment is located in Cleveland, OH. I live in San Diego, CA. In what state should I setup the LLC? Should I use a real estate attorney or legal zoom? Any advice would be appreciated. Thanks.

[Naseer Khan]

@Tim W. Shan K is correct in that your CA residency will deem you to be "conducting business in California" based on the Franchise Tax Board's (FTB) broad meaning of "conducting business."  Here is an example from the FTB guidebook:

Nick is a California resident and a member of a Nevada LLC. The Nevada LLC owns property in Nevada. The LLC hires a Nevada management company to collect rents and provide maintenance. Nick has the right to hire and fire the management company. He occasionally has telephone discussions from California with the management company in Nevada regarding the property. He is ultimately responsible for the property and oversees the management company. Nick is considered to be conducting business in California on behalf of the LLC. The LLC must file Form 568 and pay the franchise tax. (FTB 3556 LLC MEO (REV 01-2015).)

So in your situation, you can establish an LLC in Ohio but you will have to file as a foreign LLC in California (or vice versa). Either way, you are on the hook for fees from both states.

This response neither constitutes legal or tax advice nor establishes an attorney-client relationship. Inquirers must seek the advice of their own legal counsel prior to undertaking any course of action related to this inquiry.