File with the Secretary of State as "Transacting Business"

[Justin R.]

I recently purchased an apartment in GA with a LLC. My LLC is a California LLC. I was told by my closing attorney (GA) I need to file with the Georgia Secretary of State as a foreign LLC in order to do business in GA. Another attorney said it is not needed for real estate purposes (buy and hold rentals) as that is not consider "transacting business."

According the the GA SOS website Code Title 14 there are provisions to what "business" is. SOS Code 14-2-1502 subsection B,9 states.

(b) The following activities, among others, do not constitute transacting business within the meaning of subsection of this Code section:

(9) Owning, without more, real or personal property;

Does anyone have experience and a suggestion how to proceed? Thank you!!

[Eamonn McElroy]

I'm not an attorney, and you should get the final word from one.

Let's dissect the language:

"Owning, without more, real or personal property" [Emphasis Mine]

Most laypeople skip over really important language when reading sections of legal code, as they tend to focus in on parts of the code, and in doing so they miss others and don't consider everything together in a holistic manner.

What does the "without more" above mean?  I'm interpreting it to mean anything above and beyond merely holding a non-productive real estate or personal property asset means that you're running a business and would not qualify for exemption here.

Operating rental real estate would certainly be more than merely owning the real estate asset.

I would register the LLC as a foreign company with the GA Secretary of State. It's not expensive. We're business friendly.

Don't forget about your GA nonresident tax obligations.

[Jennifer Gligoric]

While owning, without more, real or personal property is not considered a business -  fulfillment of lease contracts, including property management, is considered doing business. You can have a vacation home of course, but that won't entail contracts with the public where they are legally obligated to purchase possessory rights for termed limits and their failure to abide by the contract may result in the business of having them fined or evicted.

Many landlords in many states run into issues when their property managers, or they themselves, go to evict tenants but they can't prove that they are representing the owner of the property which has the legal right to provide accommodation rental services in that county/state.  The county won't file the eviction & you may run into owing taxes, fines & penalties for operating a business without having the authority to do so.  

So yes, it's important that you or your property management company be registered to either fully handle property management in that state, including a clause, allowing them to make decisions on your property.  Different states have different laws on this, and some states/counties even require a housing business license.  It's important to become familiar with the housing laws in your state you are investing, even if you are renting a portion of a second or even primary home as an AirBNB/VRBO.

* I am not an attorney, I simply know the best ones*  
 

[Justin R.]

@Eamonn McElroy & @Jennifer Gligoric Thank you very much for your detailed response. I definitely would have assumed the property manager would need to be registered with the Secretary of State due to their direct line of operating a business. Im just surprised the LLC holding the property (myself) would also need to be registered.

Thank you and stay safe during these crazy times!!

[Bob Norton]

If someone slips and falls on your property and your LLC gets sued, then you will have standing in the GA courts to defend the lawsuit. The plaintiff will win and your insurance company will probably deny the claim. Register your LLC in GA, if it owns property there.

[Justin R.]

Thank you @Bob Norton. Exactly what I was looking for. Thanks for putting it in perspective!