Any CA Investors Investing out of state working with Anderson?

Question

Are there any CA investors investing out of state that structured their business with Anderson? I've had a few intro calls with them and they propose the following:

- WY LLC that acts as a Holding Company

- Create multiple LLCs under the Holding Company

- NOTE: this is different from a Series LLC

They claim that since your information will NOT be on the WY LLC Holding Company (for anonymity) and each LLC is a disregarded entity under the Holding Company, and therefore, doesn't file a tax return, you do NOT register any of these LLC's in the state of CA. Therefore, you don't pay the $800 CA Franchise Tax. My CPA obviously doesn't agree with this, but Anderson is a large company so I'm sure there are thousands of CA based investors who do this.

I personally think this is shady, but wanted to get other opinions.

On a side note - if you live in CA but invest in multiple properties out of state, how have you structured your LLC?

•

Christopher Smith · Answer

I do own out of state properties.

However, I'm not a big advocate of LLCs to begin with, and to me they are a total nonstarter for Ca residents (as I am).

What do I do?

I've acquired really good relatively new properties in much better than average neighborhoods. I have top shelf time tested PMs, and quality liability insurance fine tuned with umbrella insurance.

So I achieve asset protection the old fashion way, I earn it.

Christopher Smith · Answer

Well lets see. First its not my opinion since its a quote taken directly from the FTB, the folks that will audit you, then assess your deficiency and further penalize you if deemed appropriate. Second, following directly from the First, your dispute is not with me, its with the FTB, so take your aforementioned "sources of authoritative information" to the FTB, make your case and when you clearly prevail lets us all know by pointing to the FTB's notice to the public that it has reversed its heretofore unmistakenly unambiguous position on the issue.

Is that clear enough for you?

Rob C. · Answer

No, because if you had actually read my posts in the alternate thread you would have seen that I referenced / linked the very FTB page with that quote you’ve used. And I provided follow-up that challenges your thinking. Also, my dispute is not with anyone. I’m merely asking questions that challenge the “common wisdom” on BP that you seem to be propagating. And interestingly no one has yet been able to answer those questions. And it doesn’t matter to me personally what the answers are- I pursued a different approach altogether which renders this all moot. I just don’t like seeing folks misled by oversimplifications from posters pretending to know the full story.

Rob C. · Answer

@Jane Ng - I encourage you to take a look at this thread to see if you still agree with @Christopher Smith. Christoper, I don’t understand why you continue to spread this unsubstantiated opinion after our previous chats on the topic. If you really know what you’re talking about then please answer the questions I’ve posed in the aforementioned thread with links to corresponding sources of authoritative information that support your position

Eamonn McElroy · Answer

I just don’t like seeing folks misled by oversimplifications from posters pretending to know the full story.I don't think Chris is misleading anyone...  Are you provide any authority or case precedence for your position?  I did not see you provide anything in the other thread other than colorful argument and, in essence, "prove me wrong".  If the CA FTB contests your position, you'll need a lot more than that in court as the burden of proof is on you and your advisors, not the CA FTB.

A foreign LLC (as it relates to CA) that has a manager physically located in California is indeed doing business in CA as that is both the general definition and the definition adopted by the CA courts of "commercially domiciled in CA".  See CA RTC Sec 23101(b)(1), Appeal of DPMG Juniper LLC (OTA Case 20035914), Appeal of Norton Simon, Inc. (1972 WL 2642), and Appeal of Vinnell Corp (1978 WL 3943).  Those are all authoritative sources.

Inserting a trust between the LLC and you as "manager" of the LLC does not change this.  Who is the trustee of the trust?  You are, most likely.  Where are you located?  California.

There are ways to avoid nexus with CA for an LLC owned by a CA resident, but it is most often not feasible as it generally requires ceding all control in a bona fide manner.

Rob C. · Answer

@Eamonn McElroy - Thanks for chiming in. I provided plenty of authoritative sources and case law in the prior thread you were involved in that got removed (presumably because OP appeared to be selling something). Perhaps you've forgotten or didn't have a chance to digest before it was removed. I downloaded a cached version of that thread shortly after its removal. Since there was a lot of valuable info in it I'll see if I can find a way to post it without the OP's comments (which presumably led to removal). If not, I'll provide a synopsis with the relevant links. I will also be glad to take a look through the cases you referenced here to see if they fully address the matter, although it seems offhand from the context you've provided they may be beside the point. Regardless, I appreciate you providing supporting evidence of your position, which so few have done on this topic, and I will follow up.

I've also addressed / challenged your particular opinion (and assumptions) in regard to the trust aspect in the alternate thread on that trust topic since it's better suited for that focus of discussion

Rob C. · Answer

@Eamonn McElroy - I carved out some time to read through those Appeals today. I read Appeal of DPMG Juniper LLC,  but I couldn't find the other two anywhere online. Are you able to forward any links you may have to those? I don't want to speak too soon, before I've looked at all you've presented.

For what it's worth, it doesn't appear I'm able to repost the aforementioned thread that was removed given its length as well as formatting issues that will be too tedious to correct. I'll be glad to summarize key points with the links to the cases and code that I'd captured there assuming they maintain the same level of relevance after I've looked through the other two appeals you mentioned.

Rick Trivedi · Answer

@Jane Ng - We are a broker both in CA and FL, own properties out of state and had dealt with Anderson for months (not ideal) while also talking to several other CPA firms. Ping me offline if you would like feedback. Decided to go simple route as well - there is no free lunch. Once you have a complicated structure, besides other issues (IMO) that it creates, one of my main considerations was, you are cornered and limited by who can help you for tax planning and preparation, becomes a burden overtime.

Jane Ng · Answer

@Christopher Smith I agree with you. I don't understand how such a large company gets away with setting up this kind of structure for thousands of investors (they claim).

Do you own properties out of state? If so - do you mind if I ask how you structured your business? Thanks in advance!

Any CA Investors Investing out of state working with Anderson?

Most Popular Reply