All Forum Posts by: Katie Balatbat

@Travis Andres

Yes, generally, any state wherein your LLC is operating and doing business, the LLC should be registered. Since the LLC is originated in CA, it likely should be registering as a foreign LLC in Ohio.

*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.

@Evan Howe

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.

Be sure to tell your accountant that you may now need to file non-resident income tax returns in each state where you own property as well. CA taxes residents on worldwide income but may provide a credit for taxes paid to other states.

Most likely the state where the property is located is where lawsuits would be brought if they are something for personal injury like a trip and fall or something of that nature because the “cause of action” arose in that state. So even if you pick a state with stronger protections like WY or NV, the cause of action arose in the state where the tenant fell, so likely that the court where the accident happened would have jurisdiction. Of course, with all things, the answers to all these matters will depend on the circumstances.

California tends to have more laws on the books and requirements and restrictions that it can be a good idea to form a CA LLC for out of state property so that you as a CA resident are covered, and to try to have your contracts fall under the purview of CA courts. It also is helpful to have a California LLC in case you ever sell that property and move into another state so that you do not need to form a new LLC altogether with new operating agreement, just re-register in the new state as a new foreign LLC. Also, the state of formation is likely where internal disputes would be brought among LLC members, so if you and a partner and/or spouse live in CA, you probably want to arbitrate in CA if the two of you had a disagreement. But, that is not always the right answer and you should speak with someone familiar with your personal situation to get advice specific to you.

*This post is informational only and is not to be relied upon. Readers are advised to seek professional advice. This post does not create an attorney-client or CPA-client relationship.

@Allen Cunningham

Based on your post and other comments about it, you may need to ask some questions of your brother and your CPA and attorney to better understand the structure to which you are apart and your rights and powers under that structure as there are some inconsistencies in your message.

Unless the property was gifted from your grandparents to your parents, it seems that you may be missing a basis step-up somewhere along the line.  It's true that assets in a bypass trust generally do not enjoy a second basis step-up at the death of the surviving spouse, but the assets usually do enjoy a basis step-up at the death of the first spouse.  Even so, if the bypass trust was created in the early 2000s, then it seems that there still could be a significant amount of appreciation since that date.  Perhaps the trust was intended to be a generation skipping trust and held in trust for the lifetime of your parents and that's why you're not seeing a basis step-up now at the death of your parents?  Or perhaps the term bypass trust is incorrect and you're describing a different type of trust that does not enjoy a basis step-up?  Maybe there was a power of appointment or other similar provision that would have caused estate tax inclusion that you're missing a basis step-up?  It seems that wrapping your head around this, and whether you missed a basis step-up opportunity might be worth looking into with an estate planning & trust attorney. 

Also, the bypass trust doesn't usually get put into an LLC.... perhaps you mean the bypass trust's interest in the real property was put into an LLC which was then owned by the bypass trust? The tax returns may be put on extension currently and that's why you're waiting on the K-1 still?

Seems that talking these things over with your CPA and your attorney may be a good starting point.

*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.

@Shane Abbott

Sorry, you're in a tough spot.  Is there any sort of agreement in place between your dad/you and this co-owner?  Any tenant-in-common agreement or similar or provisions regarding selling or being bought out?  Who manages the real estate and collects the rents?  A partition may be an option as mentioned above, or approach the partner about someone being bought out?

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

@Tam Nguyen

A couple tidbits as food for thought for you:

CA does not recognize series LLCs. CA charges $800 minimum annually for each LLC that is "doing business" in CA, and you may want to look into that definition. You may find that it is broader than you were expecting, possibly making your structure cost a lot more than you wanted, and possibly losing anonymity that you're trying to gain. Additionally, most states have rules and restrictions about who or what can manage real estate, often requiring a broker's license to be a property manager. Most states will have an exception for managing property that you own yourself, but if you're setting up a wholly separate entity to manage another entity where it does not have an ownership interest, you may want to look into those rules and see if you run afoul of any requirements in the states where you are operating.

*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.

Is the family trust still revocable? Is the LLC wholly owned by the grantor of the trust? If so, it should be a fairly simple process. I can give you referrals for San Diego if you're 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.

@David Lutz

Just adding more food for thought from a non-tax perspective... a lot of states have rules about who or what can be a property manager in that state, often requiring a real estate broker license or similar to be a property manager (not sure what states you are invested in).  Make sure that your proposed possible structure doesn't affect that... a lot of times there are exceptions to manage property that you own, but if the management entity that you set up is not an owner of the underlying property, you may have an issue there.

*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.

@Derrick Quals

I know several CPAs that are well-versed in real estate, though most are centered in San Diego.  If you're willing to work remotely, shoot me a message and I'll be happy to send you over some names.

*This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

@Tyler Wilson

I know a bunch, though mostly centered in San Diego.  Do you have a notary available to you nearby if you were to work remotely with an attorney in San Diego?  This is for a more basic estate plan or something a little more sophisticated?

*This post does not create an attorney-client or CPA-client relationship.  Readers are advised to seek professional advice.

@Eric Jackson

Are you moving to CA or out of CA?  At least in CA, CPAs cannot usually form entities as it can be considered the "unauthorized practice of law," so I'm not surprised if you got some quizzical responses.  On the whole, attorneys are usually more big-picture and the CPAs are more detail oriented/number-crunching.  The two professions often work hand-in-hand with each other and in my experience, have provided huge assistance to each other to bring the 2 worlds together on behalf of the client.  If you're interested in a referral for the San Diego area, let me know.

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