All Forum Posts by: Katie Balatbat

@Alex U.

There are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice. Will depend on several factors like the type of property, type of tenants, your risk tolerance, other assets you own, your estate planning, laws where the property is located, etc. Same goes for number of LLCs and what to fund them with, since bear in mind that CA tends to be more cumbersome and expensive to have LLCs than other states.

California is generally more cumbersome than other states 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 probably need to pay registration and filing fees in at least 2 states if you don't buy CA property as a CA resident.

Any lawsuits should be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced, some debate as to SMLLC). But, an LLC will not limit you from liability in total. You can still lose your investment in the LLC. Or, a charging order may be granted.

If you're going the umbrella insurance route, perhaps see if it will cover you for several things including just the routine slip and fall (like mold or earthquake). You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.

Creating an LLC in California could cost you a minimum tax of $800 every year. You would have ongoing filing requirements with the State and would need to keep business records and documentation. California does not recognize series LLCs.

You also want to look at whether a pass-through entity helps your bottom line and your taxes. There is a fairly new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies. You should still be able to get this even if the properties are not in an LLC, if you qualify.

These are all things you will want to discuss with your attorney and CPA. If you need references for either of them in San Diego, let me know.

*This post does not create an attorney-client or CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

@Aram Albaro

I know a bunch of CPAs locally in San Diego.  Feel free to send me a message if you're interested.  I second that @Nate Meeker would be a fine choice for you.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.

@Lisa W.

There are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice. Will depend on several factors like the type of property, type of tenants, your risk tolerance, other assets you own, your estate planning, laws where the property is located, etc. Same goes for number of LLCs and what to fund them with, since bear in mind that CA tends to be more cumbersome and expensive to have LLCs than other states.

California is generally more cumbersome than other states 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 probably need to pay registration and filing fees in at least 2 states if you don't buy CA property as a CA resident.

Any lawsuits should be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced, some debate as to SMLLC). But, an LLC will not limit you from liability in total. You can still lose your investment in the LLC. Or, a charging order may be granted.

If you're going the umbrella insurance route, perhaps see if it will cover you for several things including just the routine slip and fall (like mold or earthquake). You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.

Creating an LLC in California could cost you a minimum tax of $800 every year. You would have ongoing filing requirements with the State and would need to keep business records and documentation. California does not recognize series LLCs.

You also want to look at whether a pass-through entity helps your bottom line and your taxes. There is a fairly new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies. You should still be able to get this even if the properties are not in an LLC, if you qualify.

These are all things you will want to discuss with your attorney and CPA. If you need references for either of them in San Diego, let me know.

*This post does not create an attorney-client or CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

@Jane Mipsey

There are several considerations that can go into the analysis of whether you need an LLC or whether a large insurance policy will suffice. Will depend on several factors like the type of property, type of tenants, your risk tolerance, other assets you own, your estate planning, laws where the property is located, etc. Same goes for number of LLCs and what to fund them with, since bear in mind that CA tends to be more cumbersome and expensive to have LLCs than other states.

California is generally more cumbersome than other states 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 probably need to pay registration and filing fees in at least 2 states if you don't buy CA property as a CA resident.

Any lawsuits should be limited to the assets of the LLC and not your personal assets (assuming you run the LLC appropriately and the corporate veil is not pierced, some debate as to SMLLC). But, an LLC will not limit you from liability in total. You can still lose your investment in the LLC. Or, a charging order may be granted.

If you're going the umbrella insurance route, perhaps see if it will cover you for several things including just the routine slip and fall (like mold or earthquake). You'll also want to ensure you have a good property manager to look after the upkeep of the property if you are not there to notice anything deteriorating or which may need attention.

Creating an LLC in California could cost you a minimum tax of $800 every year. You would have ongoing filing requirements with the State and would need to keep business records and documentation. California does not recognize series LLCs.

You also want to look at whether a pass-through entity helps your bottom line and your taxes. There is a fairly new 20% pass through deduction you may qualify for that could help you, but not everyone qualifies. You should still be able to get this even if the properties are not in an LLC, if you qualify.

These are all things you will want to discuss with your attorney and CPA. If you need references for either of them in San Diego, let me know.

*This post does not create an attorney-client or CPA-Client relationship. The information contained in this post is not to be relied upon. Readers should seek professional advice.

@Aradhana Verma

Several states in the US have either a state-level estate tax or an inheritance tax.  California has not had it's pick-up tax for several years now, which is why you may not have thought about state level estate taxes. Generally, estate taxes are levied only at death, and given that both California and Washington are community property states, you may be looking at a tax at each spouse's death.  Depending on how your trust is structured and what happens to assets at the first spouse's death, the first 50% may be taxed again at the second spouse's death.  If your estate planning attorney wasn't able to assist you in explaining how the estate taxes work, you may wish to find a new estate planning attorney.  But, it could very well be that your CA attorney is not well versed in WA laws and did not want to advise on WA taxes, which would make sense.  If you want to read up on it, there are usually several charts compiled online summarizing the different laws in each state, but you'll have to check how current the chart may be.  As you can imagine, tax laws change regularly, and usually attorneys are only familiar with the laws in their state.  So, the fact that your estate planning attorney even pointed out to you this possible issue is a good sign.  If you want any referrals for estate planning attorneys in the San Diego area, please reach out.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.

 As you've seen others post, you may be wise to research the definition of "doing business" in CA as defined by the FTB.  When you receive advice from people, make sure that they are familiar with CA laws and rules, which tend to be very different than the rest of the country and other states.  Some things that seem like a no-brainer to investors or advisers in other states in actuality create all kinds of complications and complex tax reporting in CA, as well as higher costs and fees.  I'm not surprised that you've received differing responses either, given that some people are less familiar with CA laws and rules, as well as that people have different levels of comfortability in living life on the edge for tax reporting and compliance and whatnot, and others are more hard-lined and conservative rule followers.  Not sure where in CA you're located, but if you need referrals for any professionals in the San Diego area, please feel free to reach out.  Good luck with your flip!

*this post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.

@Jerry Poon

You've received several differing responses all on 1 post, so you can see the value of a professional.  Personally, I think the quotes stated herein are quite low, and it's not surprising given that they seem to be for one of these DIY services, and honestly, you get what you pay for. If your parents only speak a foreign language, you'll definitely want to find someone who can converse with them easily and openly, and that will be a harder find.

As to the tax consequences, it really depends on what you're doing.  Most of the time there are no tax consequences, but that's not always the case and it depends on the person and their situation.  When completing an estate plan, the estate planner is simultaneously weighing estate taxes, gift taxes, income taxes, and property taxes to every proposed transaction and document.

Happy to provide some referrals in the San Diego area if you're willing to work remotely.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.

@Wayne Wollesen

Happy to provide referrals in the San Diego area if you're willing to work remotely, or unable to find from any of the very qualified persons on BP already or other referrals.  Just send me a message if interested.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.

@Maurice Stewart

Congrats on diving into the long-term rental business. Yes, as others have said, the LLC is likely not as scary as you're expecting it to be. You should be able to likely use whatever bank you want to open the account for the LLC, though some are easier to work with than others. Not sure if you have a loan or not, but if you do then you may want to look into due-on-transfer clauses. As to the tax ID, that generally is provided by the federal government (if you opt for a tax ID, though most people do), but others are correct that you would form the entity with the CA Secretary of State, or other SOS if forming in other states. You'll also want to ensure that how ownership is held in the LLC is in congruence with your overall estate plan as well. If you need referrals for attorneys, please feel free to reach out.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.

@Mazyar M.

I can give you referrals in San Diego if you're interested in working remotely or commuting a little bit.

*This post does not create an attorney-client or CPA-client relationship.  The information contained in this post is not to be relied upon.  Readers are advised to seek professional advice.