LLC creation: CA or NV?

[Edita D.]

Hey guys!
We live in CA, have a properties in NV and CA.
We want to put our properties into an LLC, and Nevada and Delaware offer lowest rates. I was advised though that if your LLC operates in a state (CA) different from where it was created (NV), the operating state (CA) may require to file with them as well (UNNECESSARY extra fees).
What did you do and what would you recommend?
thanks and have a successful day :)
Edita

[Katie L.]

@Ryan Stover

California is a sort of beastly state when it comes to taxes and filings. Even if you create a non-CA LLC, if you are managing the business from California, you will be deemed to be "doing business" in California and therefore subject to CA taxes. California charges a minimum tax of $800 a year per LLC, and more if you have gross receipts in excess of $250k. So, if you create an LLC in another state, you will need to register it as a foreign LLC in California. Though, this process will be the same for the other state (if you created a CA LLC you will need to register it as a foreign LLC in the state in which you are doing business/holding property). This means that you will need to pay registration and filing fees in at least 2 states if you don't buy CA property. Be sure to tell your accountant that you now need to file non-resident income tax returns in each state where you own property as well (though I believe NV has no income tax).

Most likely the state where the property is located is where lawsuits would be brought if they are something for personal injury like a trip and fall or something of that nature because the "cause of action" arose in that state. NV generally has stronger protections for landlords than CA. California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts. But these are questions you will want to ask your attorney to get a sense of which type of LLC you should form.

When you say that your involvement will be 100% passive, I'm not sure if you know the meaning of that.  Passive in the sense that it won't be "active" income for tax purposes, or passive in the sense that you have no decision making powers or authority at all?  Even if you hire a property manager who makes day-to-day decisions, if you have ultimate authority, then you are likely doing business in CA.  Also, CA does not recognize series LLCs so be careful there.  You'll want to consult an attorney for these questions and to get advice to your specific situation.

*This post is informational only and is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client or CPA-client relationship.