California residents investing out of state, LLC, DST, etc?

[Jason Pham]

Hello fellow investors. I am a California resident investing in Charlotte NC. I have a several SFRs and in the early stages working with a GC to build some new homes in the near future.

I've been operating my business under my own name for the past several years and I believe I'm at a point where I should begin to look more seriously into asset protection.

I looked into setting up an LLC, but I feel special because I'm 'lucky' to be a California resident. I learned that there are additional obstacles and expenses required for California resident. As I looked more into LLCs I realize asset protection is extremely complex.

Under California Revenue and Taxation Code (Tax Code), I would be considered 'doing business in California if any of the criteria below is met and I would need to create an LLC in California:

• 1-If your gross sales for the company is 25% or more for the State of California, or the gross sales exceeds a threshold (just over $600k) IN the State of California, even if under 25% of your overall sales
• 2-Or, the assets (real or personal property) owned by the company and located in the State of California is 25% or more of the total assets of the company, or the total assets exceeds a threshold (just over $60k) IN the State of California, even if under 25% of the assets owned by the company. 
• Under this requirement, would one's personal California home be considered 'asset' under this definition???
• 3-Or, the payroll compensation paid is 25% or more in the State of California, or the California payroll compensation exceeds a threshold (just over $60k), even if under 25% of the overall compensation paid to folks outside of CA.

How are my fellow California residents structuring their business for asset protection while still operating their out of state portfolios (rentals, buy and hold, renovations, new builds, etc)?

Do you setup a California LLC then register that as a foreign LLC in the state that you own investment properties?

Alternatively, I believe one can setup an LLC out of state as the managing LLC for your California LLC?

How's everyone doing this??

Thank you...

Jason