Do I need an attorney to set up an OOS LLC?

Question

Hi folks,

Working on getting my holding LLC off the ground. I'm going to set up my LLC in Wyoming (even though I live in California and properties will be located in other states, Wyoming has very favorable LLC laws).

Is this something I need an attorney for? Fees are steep.

Thanks!

Steve Smith · Answer

No, don't need an attorney for an LLC, but I could argue to hold your properties in a trust, not an LLC, and use some form of a business (LLC, SubS, Business Trust) to run your management through. However, could argue that you just don't need an LLC.

Whatever you decide, do some research, get some books, take a course and learn about them.

Floyd Fajardo · Answer

Always a good idea to speak with one, but you don't need to hire one to create an LLC.

Basit Siddiqi · Answer

@Norman BermanYou don't need an attorney to set up an LLC but you may benefit by speaking with one.

Cal Dunagan · Answer

@Norman Berman
You don't necessarily need an attorney to set up an LLC. You can spend hours doing the research and setting it up right, and you may do it right the first time. However, you will only benefit from having guidance from a professional. And since you're in California, have you ever heard of a Delaware Statutory Trust? This is a really good article about how a DST can help you in California if you ever end up acquiring property there.

Brian Boyd · Answer

No one needs an attorney until they do. With that nugget of ominous wisdom, you can find all the forms you need on the secretary of state's website. However, when you hire an attorney or a CPA, you are hiring a knowledge base about many things. As an attorney who practices in tax and real estate, I hire attorneys all the time if for no other reason than its always good to have some help and guidance in areas I may not be comfortable in. Do your research, ask questions and you can always come on BP and we will be happy to point you in the right direction. Good Luck and go for it!

Sean Morrison · Answer

Disclaimer: I am an attorney, but I am not your attorney. This is not legal advice, just friendly information.

As a general rule, real estate holding LLCs should be created in the same state as the property. While some states have better protections for LLCs than others, when it comes to real estate courts only want to recognize local protections. In other words, they won't give you Wyoming's LLC protections, they'll give you the local protections. If you want your Wyoming LLC as a holding LLC, you could do that, but it's just more paperwork and fees. The value in having a holding company like this would be to protect property in state A from property in State B.

But California is going to require you register each LLC, no matter where they are, as doing business in California and that's $800 per year.

And yes, you can register an LLC very easily with the Secretary of State, but that's just step 1. Remember, you're talking about a company with potential subsidiaries. You'll need agreements and documents in place outlining the parent-child relationships of the companies, spanning multiple states' real property and asset protection rules. Lots of people go it alone, but not the serious players.

Justin R. · Answer

Creating an LLC should be way down the list on your short/mid term goals for asset protection.

1. Get the right insurance and coverage.

2. Do the right thing. IE;If there is a loose stair railing then fix the darn thing.

3. Get an umbrella liability policy.

If you have all of these then determine if you are even a credible target. Do you have assets that could actually tempt the attorney and plaintiffs? Do you have debt on the property? If so then is there even any equity left to pay them?

If you have assets, and still need more protection than you can justify the cost of a good attorney. I am also in CA and use the DST for several reasons. If you go this route @Scott Smith is the best at this. Based upon your post though, if you are worried about spending the money talking to an attorney,  you would be better off forgetting the LLC and spending that money on another down payment.

Either way, best of luck!

Eamonn McElroy · Answer

Is this something I need an attorney for? Fees are steep.

So is the annual CA LLC tax, which is $800 per LLC per year.

Have you determined after speaking with your advisors that you need a Wyoming "holding LLC"?

Nathan Gesner · Answer

No, you do not need an attorney. There are companies online that will help you, but even that is more expensive than you should pay. CLICK HERE for the Wyoming Secretary of State website and they have all the forms and instructions there. I think it's around $100.

Katie L. · Answer

@Norman Berman

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 likely be deemed to be "doing business" in California and therefore likely 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 likely 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 may 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 may now need to file non-resident income tax returns in each state where you own property as well. 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. So even if you pick a state with stronger protections like WY or NV, the cause of action arose in the state where the tenant fell, so likely that the court where the accident happened would have jurisdiction.

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.  It also is helpful to have a California LLC in case you ever sell that property and move into another state so that you do not need to form a new LLC altogether with new operating agreement, just re-register in the new state as a new foreign LLC.  Also, the state of formation is likely where internal disputes would be brought among LLC members, so if you and a partner live in CA, you probably want to arbitrate in CA if the two of you had a disagreement.  But, that is not always the right answer and you should speak with someone familiar with your personal situation to get advice specific to you.

*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.

Do I need an attorney to set up an OOS LLC?

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