Advice in forming an out of state LLC

[Jecarl Viray]

I am a newbie in BP and would like to get advice from the group. Situation: I live in California and I currently own a rental property in Indianapolis and preparing to get my second rental property. I talked to my CPA and I was advised to form an LLC (even though I currently have 1 property) since my income is more than $150,000. I was told that I this is the only way I can deduct the rental expenses. Question: Should I form my LLC in Indianapolis or in California? I know it's cheaper to form LLC in Indianapolis but not sure if there's California laws that would require me to register in CA as well. I don't want to end up registering on both State. I appreciate any advice. Thanks!

[Scott Smith]

@Jecarl Viray If you are looking to avoid the $800 per year franchise fee you may also want to consider a DST to hold your rental property. The DST (Delaware Statutory Trust) is not obligated to pay the $800 franchise tax mentioned above, and can contain as many assets as you like. The DST is viewed as an estate planning tool, and therefore exempt from the far-reaching corporate tax laws set forth by California’s FTB.

I would agree that having a CPA that is experienced in Real Estate appears to be a good idea at this point.  There are a few that are on BP as well.  I believe you can find information from @Brandon Hall @Nicholas Aiola and @Amanda Han These are a few that I know my clients use as their Real Estate CPA.  I also see that Katie Lepore has some great information.

If you have any questions please feel free to leave a reply or DM me.  This is not legal advice, just my opinion as a real estate investor. 

- Scott