Switching from a California-based LLC to a Wyoming-based LLC

[Gulliver R.]

Hi All,

I'm planning on switching from a California-based LLC to a Wyoming-based LLC for my California rental property. Let me explain..

Currently I own a property in California which is owned by a California-based LLC. So my plan is to create a Wyoming-based LLC because there's no state tax there and the fees are lower. Then I want to have that Wyoming LLC be the LLC that holds title to my California property. So my question is: can I do that? And is there anything you think I should know about this before I pull the trigger on it? Thank you in advance for the advice! :)

Best,

Gulliver

[Michael Plaks]

@Gulliver R.

You can do it, but it will not accomplish your goals.

First, your property is in CA. This is CA-source income always subject to CA state taxation, no matter who owns it. I can own a CA property, while living in Texas and not having any LLC - and CA will still tax me on it. There is no way to avoid CA taxation on a CA rental property.

Second, you are residing in CA yourself, based on your profile. Your mistake, if you ask me. :) Because of you being a CA resident, no matter where you create an LLC, Wyoming included, your greedy state will consider your LLC as doing business in CA, and you will owe $800/yr for the, ahem, privilege. You can avoid this by dissolving your LLC altogether and owning your property personally. Before doing this, get legal advice, because your current LLC may be giving you valuable legal protection. Whether or not it does so is a question for a CA attorney.