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Updated almost 6 years ago on . Most recent reply
LLCs and Foreign Entities
My partner and I were new to Real Estate investing 10 years ago and bought a rental property and placed it in an LLC outside the state of the property. We never realized that it was necessary to file as a foreign entity and file taxes there as we assumed it would all pass through. Mortgage and property manager relationship is in our names.
Should we register the LLC as a Foreign Entity now before tax season or just pull the property out of the LLC with no harm, no foul?
Most Popular Reply
Well if the property is in a state that has state income tax exposure... then you have a problem. Registering the LLC as a Foreign Entity is more of a state law issue regarding entity formalities as opposed to state tax law. You have a multi-member LLC and depending on what state the rental is in, you may have had to file Partnership/LLC entity tax returns in that state. On the other hand, there are states like Florida where this is a non-issue.
Did your CPA overlook this or you were filing yourself?