Are There Benefits to Opening an LLC Inter-State?

[David Haynes]

I'm a Philadelphia investor, real estate agent, and wholesaler doing business in Philly, Montgomery County, and Delaware County. I know that corporations benefit from establishing themselves in specific states (i.e. Delaware) because of their lenient corporate laws and tax requirements. Can the same be said for LLCs? Would it make sense to open an LLC in a state other than the one where you do the majority of your investing?

[Chris K.]

@David Haynes

For real estate holding companies, I use an LLC from the state where the property is opened. So if I'm going to buy a property in PA, I use a PA LLC. If I'm going to buy a property in AZ, I use an AZ LLC. It's what I have decided after weight the pros and cons.

One concrete reason to open an LLC in a different state is to take advantage of series LLCs. I don't use them in PA because we have no caselaw on the topic. It took about 15 to 20 years for law on LLCs to settle down a bit. But some people may decide that the pros of a Series LLC outweigh the cons caused by its uncertainty.

Delaware is special but not for reasons that would matter to an average real estate investor.

In terms of the other factors, I don't know. People pitch Wyoming and Nevada all the time but I haven't seen convincing evidence that they are significantly better than other states. That's especially true when you take the LLC and do business in another state. And the practical reality is that if I'm doing a deal out-of-state, I'm going to be using outside counsel. The chances of that attorney also being an expert on LLC/corporate law in multiple jurisdictions is fairly low (e.g. my expertise with LLC/corporate laws are limited to PA and DE). So I would rather keep things simple.

Disclaimer: While I’m an attorney licensed to practice in PA, I’m not your attorney. What I wrote above does not create an attorney/client relationship between us. I wrote the above for informational purposes. Do not rely on it for legal advice. Always consult with your attorney before you rely on the above information.