What state is the best to open an LLC for real estate investment

[Greg Reese]

I have a new business my family is creating for real estate investment. We are going to focus on small multi-family first, and then get into large multi-family. Where is the best state to open an LLC for this purpose? The first purchases are likely going to be California, Montana, and Texas. Thanks.

[Max Gradowitz]

Originally posted by @Natalie Kolodij:

Originally posted by @Max Gradowitz:

I'm in CA and the most common LLC-related question I get is "I live in CA, I want to buy properties in other states, what state should I open an LLC in so I can save money?"

I don't know what state you live in, but if you live in CA and own rentals anywhere, you have to have a CA LLC. In CA, you are legally required to have a CA LLC if you are "conducting business in CA". Even if you own a property in TX, you are conducting business in CA because you live here, collect the income here, etc. If you do have a TX LLC just to hold a TX property, you still have to register in CA as a foreign LLC, which still means paying the CA LLC tax. So there's no point in having an out of state LLC in that scenario.

I would imagine other states have similar laws, but I do not know for sure. You should consult a business attorney in your state regarding this. But my point is that it's not as simple as just finding the cheapest LLC state and opening an LLC there just to save money. There are no free lunches man.

I'm not an attorney so everyone should confirm with one. 

But I don't believe this is fully correct. 

If you have an LLC operating in another state but you reside in CA they make you REGISTER that LLC as a foreign LLC doing business in California. I don't think you need to open a direct California LLC.

This is correct. I should have clarified, you have to register your out of state LLC as a foreign LLC in CA, and pay the CA LLC tax anyway.