Best LLC formation strategy for Tennessee

[Trevor Marvin]

Hey all,

I'm working with two partners to complete a BRRRR deal in the surrounding Nashville submarkets. Two of us are located out of state and one is located in Tennessee. We were curious if somebody could provide insight as to if it would be optimal to form a Tennessee LLC or go out state (FL, WY, DE, etc.). If we were to form an out of state LLC, does anyone know what the drawbacks might be for purchasing real estate within Tennessee? Thank you in advance!

[Jason Marino]

Hi Trevor,

If the LLC will own property in Tennessee, hire contractors, and do other business in the State, the best options are to either form a Tennessee LLC or form an LLC in another State and register that LLC to do business in Tennessee. The things that this LLC will be doing will likely be considered doing business in Tennessee, and the most risk averse option will mean having a Tennessee LLC or registering a foreign LLC to do business in the State. Not doing this can lead to fines, or, even worse, if the LLC is involved in a lawsuit, it can be disregarded because it is not registered to do business in the State.