All Forum Posts by: Greg Rose

@Greg Rose

First from a Holding LLC either in Wyoming or Nevada as Manager Managed (to hide your name from public records), you can form this as a partnership with your spouse if you want. Then form a PA LLC with WY/NV LLC as the sole member. Property title will be in PA LLC name. In PA you do not have to file annually for LLC's (professional LLC like Doctors, Lawyers must file annually), you will be required to file once in 10 years, so there is no extra cost other than $125 PA fees, $50 Registered Agent fees. Ofcourse you have to pay $50 each year for Registered Agent fees.

With this setup, you can form new PA LLC for each property you purchase. For Taxes, you will only file Taxes for your WY/NV holding company, if it is a sole member then it will show up in your schedule C of 1040.

Hope this helps!

Why an LLC @Greg Rose?  I've had one for years and wish I never did. I am in PA and have a bunch in and a bunch outside. Most attorney's want you to form an LLC so they can bill you for the formation etc (I created my LLC on my own).  It just adds more complex to your tax return and what legal advantage does it get you?  Be honest.  Also, if you want to refi that cash flowing property in one year; now you'll have to get a commercial loan due to the LLC vs a personal loan (which has tons more advantages than commercial.  So my advice since its your first property is to be careful making this more costly and complicated than it has to be.

@Greg Rose

I operated a NY LLC and did a lot of business in PA. I believe I had to pay a franchise tax to Pa for that LLC to operate, not sure, you may want to look into that when understanding costs.

@Greg Rose -Ask an attorney this questions: Does where you form it afect where legal proceedings take place? If you form it under Cally state  where legal proceedings would take place. If you from it in Callly, does that mean if there is suing going on it would take place in Cally? If formed in PA would PA laws apply? I think LL/tenant court is not applicable here and would take place in the state of the buildings presence. 

I am a CPA, not a lawyer, so this is not legal advice. Actually its not tax advice either. Its just a couple of questions for consideration. 

Regardless of where you form it, you will need to file a PA return, and if you pay tax there, you then take a credit on your Cally return so you are not double taxed. Pennsylvania is a flat tax of 3.07% on the taxable income.

Jim Kennedy, CPA

@Greg Rose, you mention "we" several times, and "I" once... so, as far as the LLC is concerned - is this you (a single member LLC) or you & partners (a multi-member LLC)? THis will make a difference to your tax treatment, meaning single member wont necessarily trigger "ordinary income" as a multi-member would - Im NOT an accountant, but did just last week setup a couple more entities and made some changes to an existing one.

One other suggestion - PA has a 2% transfer tax (1% to buyer, 1% to seller) that you want to keep in mind). IF you later decide to chage more than 90% ownership of the LLC it will trigger real-estate transfer tax, talk with your accountant & or attorney on this one. In other words, have your entity ownership worked out BEFORE you put a property into it or it may become more costly later on.

You might also want to have a Nevada LLC hold the PA LLC as the laws were just changed in PA significantly weakening a single member LLC as far as charging orders are concerned. This one is for an attorney to answer, however in my case another "holding" entity was formed to hold multiple LLC's under that umbrella. We formed and changed managers to the holding company BEFORE putting any value into the entity, otherwise you have the transfer tax issue to contend with.

Best advice - seek competent PA council that knows this stuff cold. I can give you my attorneys name, but I will forewarn you, he ain't cheap (but also known as the best in the valley - where I live)

Hi @Greg Rose: 

1. Are you planning to do a title search and get a title insurance? I assume you are, but you didn't expressly say so. I would recommend that you do so. 

2. It might make sense to consider getting an umbrella policy as well. 

3. As for your specific question about setting up your LLC to pay yourself, it most likely will not make a difference if you do not elect your LLC to be treated as a S-Corp. But as always, I would recommend that you speak to a CPA about this and other matters.

You could form your LLC in California and then register it as a foreign entity doing business in Pennsylvania. find out from your CPA and Attorney what State is best for you to form your LLC in, you could do it in Another State and register as a foreign entity. you do not have to have a Pennsylvania LLC.

Your LLC will need a federal EIN.

You will want to locate an accountant familiar with filing the PA state LLC annual income tax forms.

The municipality will probably require you to have some kind of rental license, and they usually charge a fee per unit. If it is in Philadelphia, there is a whole lot more you will be required to do to comply with rental regulations there.