LLC California Franchise Tax

[Olga Zelenko]

I just discovered that if I live in California and I have an LLC (in or out of state) I will be required to pay Franchise Tax in California (annually 800$) for each LLC.

My first plan was to create for each property its own LLC.

This discover is changing my plans (and my numbers of course 🙄 )

A few options that came to my mind to try to avoid this route:

1. Instead of creating an LLC, purchasing an Umbrella insurance for all the properties.

2. Create 1 LLC and sign a few properties under the same LLC (instead of paying 800$ for each LLC/property)

Are there other options that I didn't think of?

What are the pros/cons for the Umbrella insurance vs LLC?

Thanks for your wisdom in advance 🙌

[Timothy Murphy III]

Originally posted by @Michael Plaks:

@Olga Zelenko

Also notice that people who give you legal advice about LLCs or even insurance being unnecessary have all graduated from the Social Media School of Law, apparently with honors. I'm not an attorney, so I won't be offering my legal advice, and neither should they, frankly.

Of course attorneys are interested in "selling" you the LLCs and other structures. Same as doctors are interested in "selling" you medications and procedures. I still take my medical advice from doctors and not from Facebook. I guess I'm old-school. 

This post as a whole is excellent advice, and a question I get a lot. At least in Ohio, the LLC is almost always worth using for property investors, EXCEPT when the investor resides in California, for the tax based reasons Michael discussed. The portion I quoted is hysterical in addition to being good advice. There's lot of people giving advice on how LLCs and tax issues function in the real world despite having no background or qualifications to actually give this advice. Beware legal advice from Facebook lawyers.