Investing Out Of State Through an LLC While Living in NYC

Tax, SDIRAs & Cost Segregation
11yFollow

Investing Out Of State Through an LLC While Living in NYC

Charles Worth
Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes

For those that live in New York (NYC) and invest out of state through an LLC, do you know if there are any additional costs to have an out of state LLC while still living in NYC?

I know CA for example has a high extra cost to living in CA and investing out of state through an LLC if you are deemed to be doing business in CA.

1Reply
138 views

Most Popular Reply

Brandon Hall
CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
11y

@Charles Worth

Here is a good article on NY LLCs:

http://www.nolo.com/legal-encyclopedia/new-york-form-llc-32140.html

1Reply
See this reply in the discussion

22 Replies

Jump to latestLatest
  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    11y

    @Charles Worth

    Here is a good article on NY LLCs:

    http://www.nolo.com/legal-encyclopedia/new-york-form-llc-32140.html

    1Reply
  • Charles Worth
    OP
    Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    @Brandon Hall

    I should have been more clear I was talking about an out-of-state LLC investing out of state while living in NYC. So let's say an Illinois LLC investing in Chicago but while living in NYC. I have been told this has adverse tax consequences in places like California so was curious if NYC had the same issues.

    1Reply
  • Brandon Hall
    CPA · Raleigh, NC · Member since 2013 · 1k+ posts · 2k+ votes
    11y

    @Charles Worth

    The bottom of that article briefly touches on foreign LLCs, being that they need to file a certificate of existence and pay $250.

    I believe NY's franchise tax is applicable only to foreign corporations, not LLCs. In California, foreign LLCs are subject to the franchise tax as well. I could be wrong here though.

    0Reply
  • Trevor Ewen
    Rental Property Investor · Weehawken, NJ · Member since 2014 · 1k+ posts · 704 votes
    11y

    @Brandon Hall & @Charles Worth

    I would just double check if even the fee is necessary. I assume the LLC will not be doing any business in NYC.

    My software company is an LLC based in Delaware. Our fees are related to the fact that we do our business and have employees and an office in NYC.

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    You'd definitely want to check with a good, investor-friendly accountant in NY I think. I'm in CA and my accountant (Amanda Han, that writes blogs on here) is the only reason I found out that I would take on the CA fees for out-of-state stuff. CA is notorious for claiming every single thing their residents do regardless of location, and just not sure if NY is that bad about it. But a good accountant is your ticket to know. Even if someone on here tells you one way or another, make sure to confirm all info with a NY accountant.

    What kinds of properties are you doing outside of NY that you are using an LLC for?

    1Reply
  • Charles Worth
    OP
    Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    @Ali Boone

    That is exactly the item I was talking about. NYC also has a lot of these various taxes and laws like CA because so many people have tried to get around the high taxes here. My hope is that as Trevor mentioned they are more focused on people doing business in NYC (actual business) and not investing outside of it.  Sadly I have not seen any good accountants on here from NYC.

    I mostly buy properties that need significant rehab and either sell or keep them. I do this in Chicago and possibly in Philly shortly.

    0Reply
  • Charles Worth
    OP
    Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    @Brandon Hall

    I saw that, I had assumed it was more to do business in NYC. 

    0Reply
  • Ali Boone
    Real Estate Coach · Venice Beach, CA · Member since 2012 · 6k+ posts · 3k+ votes
    11y

    Very cool. Yeah, no idea on good accountants there but hopefully you find one. Best of luck!

    Oh, and I meant to say you have a really friggin' cool last name for being a real estate investor! It's kind of a given you will be successful at it with that name :)

    0Reply
  • Charles Worth
    OP
    Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    11y

    Ha well lets hope so

    0Reply
  • James L.
    Dallas, TX · Member since 2016 · 19 posts · 6 votes
    9y

    @Charles Worth Hi Charles, was wondering what you figured out on the tax and fee implications of living in NYC and investing out of state through an LLC.

    I currently live in NYC and am looking to buy investment properties in Dallas, TX. I have actually been trying to figure out if I should set up the LLC in New York or in Texas - though most people, I spoke with, suggested setting up a LLC in the state(s) I am investing in as the business/income dealing are in those states. Assuming I do set up the LLC in Texas, wanted to get a sense of the type of fees and costs to have an out of state LLC while living in NYC.

    Thanks in advance for any help or advice you can provide on this.

    0Reply
  • Todd Dexheimer
    Rental Property Investor · St. Paul, MN · Member since 2016 · 3k+ posts · 3k+ votes
    9y

    Talk with a CPA and attorney. My CPA has told me that it doesn't matter. You will pay the tax for the state you live in if it is an LLC. If you file in other states you will need to have a mailing address (not PO box) that you claim as your business address. The other thing you can do is form a NY LLC and file a foreign filing to do business in a different state. That may be the best/easiest thing to do.

    0Reply
  • Taylor Brugna
    CPA · New York, NY · Member since 2016 · 203 posts · 132 votes
    9y

    @James L. A foreign LLC that doesn't any activity derived from NY sources won't be subject to any type of filing fee. I have a few Florida LLCs myself, and the income, etc. is derived from FL properties, no filing fee required.

    You are correct in that you should set up the LLC in the state that you invest in, that's generally the recommended approach.

    0Reply
  • James L.
    Dallas, TX · Member since 2016 · 19 posts · 6 votes
    9y

    @Todd Dexheimer Thanks Todd. Would definitely be good for me to talk to a CPA and/ attorney as well as I am sure rules and regulations apply differently in different states and would be situation dependent.

    @Taylor Brugna Thanks Taylor. So did you create one LLC for each Florida property or did I read that wrong? Also, did you look for and use an attorney or CPA in Florida to help set up the LLC or did you use an online service like Legal Zoom?

    0Reply
  • Taylor Brugna
    CPA · New York, NY · Member since 2016 · 203 posts · 132 votes
    9y

    @James L. No, there are multiple properties in my LLCs. It's up to you and your attorney to figure out how much exposure/equity you are comfortable with in one LLC. Keep in mind a bunch of LLCs has a bunch of administrative costs associated (filing fees, tax prep fees, etc.) so there is always a cost benefit.

    I am a CPA :) I'm comfortable enough to not use an attorney to form an LLC for what I need it for, but it never hurts to make sure you are doing it properly. I use vcorp services.

    0Reply
  • Nick Glatzer
    Brooklyn, NY · Member since 2017 · 17 posts · 2 votes
    9y

    Taylor, you still have to pay both Fla and NY income tax on the investment income, correct?

    0Reply
  • James L.
    Dallas, TX · Member since 2016 · 19 posts · 6 votes
    9y

    @Taylor Brugna Another added benefit to being a CPA I guess. :) Yup - I will definitely need to consult with the professionals at some point.

    0Reply
  • Taylor Brugna
    CPA · New York, NY · Member since 2016 · 203 posts · 132 votes
    9y

    @Nick Glatzer FL is a no income tax state but yes, paying tax on any of the rental income in NY. 

    0Reply
  • Tomer Shani
    Investor · Astoria, NY · Member since 2017 · 31 posts · 14 votes
    9y
    Hi @charles worth I currently live in NYC and slowly investing out of state (I'm investing in Philly) States have different rules and fees regarding their legal entities (for example, Philly has a Business Privilege Tax of $300 upon formation.) I tried to study every aspect of that and found that it takes too much of my time. I strongly recommend to get yourself an out of state CPA (who has experience in RE!), you can also have them be your register agent so you won't miss any mail that is directed to your business. Don't get an NYC CPA to work in a different state. That's backwards. I know I know... "hire a guy.." is a tired advice. But lest we forget that business is a team sport. And while it's good thing to have some idea about the laws in the state that you're investing in, I would cautious you not to try and figure it out on your own (or with the help of the BP community alone),Unless you want to become a lawyer/CPA with expertise in RE. Hope that helps!
    0Reply
  • Charles Worth
    OP
    Investor · New York City, NY · Member since 2015 · 808 posts · 417 votes
    9y

    @Tomer Shani

    yes I did end up hiring someone though after my LLC was formed.

    @James L. as others have noted I don't think there is any fee in NYC. I have never paid one. 

    Also, you should be aware of (or ask a tax pro) about the diff between a sole member LLC and an LLC with others so be sure to discuss that with whoever you choose though they should ask you anyway.

    0Reply
  • Basit SiddiqiBusiness Member
    Accountant · New York, NY · Member since 2015 · 8k+ posts · 3k+ votes
    9y

    I do want to add 1 item

    If you are a NY resident and are a member in a multi-member LLC(taxed as a partnership); NY will require the partnership to file a tax return with NY.

    The NY Partnership can essentially be blank with no NY income. NY wants the partnership return to be filed so they can track how much income its residents are earning.

    This can be considered a "fee" since it will cost your accountant extra money for this filing.

    [email protected]917-280-8544
    Basit Siddiqi CPA4.880 Reviews
    View Page
    0Reply
  • James L.
    Dallas, TX · Member since 2016 · 19 posts · 6 votes
    9y

    @Charles Worth Thanks for confirming. In the process of looking for a CPA in Dallas, TX at the moment.

    0Reply
  • Jim Martin
    Investor and CPA · Frisco, TX · Member since 2017 · 6 posts · 1 vote
    9y

    @James L. if you need a CPA in Dallas, PM me. I can help you out.

    0Reply
Join the conversationCreate a free account to reply, vote on answers and follow this thread.
Log InJoin for Free