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All Forum Posts by: Sahaj Bhakta

Sahaj Bhakta has started 8 posts and replied 26 times.

Post: Veteran needs help in first SELLER FINANCING deal; HELP!!!

Sahaj Bhakta
Pro Member
Posted
  • New to Real Estate
  • California
  • Posts 27
  • Votes 18

Hi Nia, thanks for posting this with all the info layed out. I am learning the ropes and content like this really helps me navigate the creative financing terms!

Post: Need Advice about LLCs - foreign vs. domestic (CA resident)

Sahaj Bhakta
Pro Member
Posted
  • New to Real Estate
  • California
  • Posts 27
  • Votes 18
Quote from @Megan Templeton:

Being a California resident can be a trick when navigating LLCs with due to the franchise tax. While using an LLC or Corp to own propertly remotely wouldnt require a foregin filing in the state of the property (property can be held remotely without needing a foregin filing as its not "doing business" in the state), the issue you will run into with an LLC or corporation in CA is the yearly fee. From the CPAs we work with, just being a CA resident puts you at risk of an entity, other than trust, being subject to the franchise tax. To avoid the yearly fee, we recommend using a DST. It avoids the CA franchise tax, is scalable so you can add multiple assets under it while benefiting from the liability minimixation structure of child series' , and it can streamline your operations by using one set of books, bank account, etc. The DST can minimize liability by having each property in its own child series, streamline your operations, and minimize taxes. To ensure you are staying on the right side of state specific laws, I would recommend working with any atty knowledgable of the states laws. I would love to chat with you and connect more!


 This statement clears up a lot of the confusion I had: "property can be held remotely without needing a foregin filing as its not "doing business" in the state"

Thanks! This sparks a follow-up question where I imagine that the income tax from both the business entity and an individual salary from being a CA resident is unavoidable. That's where the idea of having an out-of-state entity where there is no income tax may be beneficial to avoid 'double taxation'. This way my business is not being taxed, and only the salary received is being taxed in CA.

Post: Need Advice about LLCs - foreign vs. domestic (CA resident)

Sahaj Bhakta
Pro Member
Posted
  • New to Real Estate
  • California
  • Posts 27
  • Votes 18
Quote from @Megan Templeton:

Being a California resident can be a trick when navigating LLCs with due to the franchise tax. While using an LLC or Corp to own propertly remotely wouldnt require a foregin filing in the state of the property (property can be held remotely without needing a foregin filing as its not "doing business" in the state), the issue you will run into with an LLC or corporation in CA is the yearly fee. From the CPAs we work with, just being a CA resident puts you at risk of an entity, other than trust, being subject to the franchise tax. To avoid the yearly fee, we recommend using a DST. It avoids the CA franchise tax, is scalable so you can add multiple assets under it while benefiting from the liability minimixation structure of child series' , and it can streamline your operations by using one set of books, bank account, etc. The DST can minimize liability by having each property in its own child series, streamline your operations, and minimize taxes. To ensure you are staying on the right side of state specific laws, I would recommend working with any atty knowledgable of the states laws. I would love to chat with you and connect more!


 Wow! thanks for your input! I would be more than happy to chat. Thanks again for the feedback - it's highly appreciated.

Post: Need Advice about LLCs - foreign vs. domestic (CA resident)

Sahaj Bhakta
Pro Member
Posted
  • New to Real Estate
  • California
  • Posts 27
  • Votes 18
Quote from @Todd Rasmussen:
Quote from @Sahaj Bhakta:

Hi Everyone! I would appreciate if any accountants, lawyers, etc. can shed some light on the implications that arise from being a CA resident who invests out-of-state through a business entity such as an LLC.

I want to create an LLC to invest in out-of-state multifamily rental properties (to hold for a long period of time, possibly forever). My question stems from the fact that an LLC can be treated as "foreign" or "domestic" depending on where it was created versus where it does business.

Please correct me if I am wrong: In this example, I live in CA but am buying property NOT in California.

If I create a California LLC but purchase property out-of-state (let's say Colorado), I would be operating illegally and be subjugated to the appropriate fines. In order to adhere to the law, I would need to refile my (domestic) California LLC as a foreign LLC operating in Colorado - resulting in double taxation, right?

Related questions:

1. Am I limited to only creating LLCs in the state that I reside in and how does this affect my ability to open business checking/credit accounts with a bank?

2. What is the most effective method to make sure I am following the law as I purchase property that is NOT in California?

To everyone who has read through this far, I appreciate you and am eagerly looking forward to hearing your thoughts!

Thank you!!!

Not a lawyer or an accountant, but I am etc.

You can incorporate your LLC in any state regardless of your residence and where your investment properties are located.

Go to the secretary of state's website of where you are purchasing your investments and see what they require (registering your LLC as a foreign entity). Usually its an annual report as a way to collect a fee and then depending on the state, just pay the appropriate taxes.


 thanks for your input!

Post: Need Advice about LLCs - foreign vs. domestic (CA resident)

Sahaj Bhakta
Pro Member
Posted
  • New to Real Estate
  • California
  • Posts 27
  • Votes 18

Hi Everyone! I would appreciate if any accountants, lawyers, etc. can shed some light on the implications that arise from being a CA resident who invests out-of-state through a business entity such as an LLC.

I want to create an LLC to invest in out-of-state multifamily rental properties (to hold for a long period of time, possibly forever). My question stems from the fact that an LLC can be treated as "foreign" or "domestic" depending on where it was created versus where it does business.

Please correct me if I am wrong: In this example, I live in CA but am buying property NOT in California.

If I create a California LLC but purchase property out-of-state (let's say Colorado), I would be operating illegally and be subjugated to the appropriate fines. In order to adhere to the law, I would need to refile my (domestic) California LLC as a foreign LLC operating in Colorado - resulting in double taxation, right?

Related questions:

1. Am I limited to only creating LLCs in the state that I reside in and how does this affect my ability to open business checking/credit accounts with a bank?

2. What is the most effective method to make sure I am following the law as I purchase property that is NOT in California?

To everyone who has read through this far, I appreciate you and am eagerly looking forward to hearing your thoughts!

Thank you!!!

Post: CA resident wanting to form LLC to do business Out of State

Sahaj Bhakta
Pro Member
Posted
  • New to Real Estate
  • California
  • Posts 27
  • Votes 18

Hi Everyone! I would appreciate if any accountants, lawyers, etc. can shed some light on the implications that arise from being a CA resident who invests out-of-state through a business entity such as an LLC.

I want to create an LLC to invest in out-of-state multifamily rental properties (to hold for a long period of time, possibly forever). My question stems from the fact that an LLC can be treated as "foreign" or "domestic" depending on where it was created versus where it does business.

Please correct me if I am wrong: In this example, I live in CA but want to buy property NOT in California.

If I create a California LLC but purchase property out-of-state (let's say Colorado), I would be operating illegally and be subjugated to the appropriate fines. In order to adhere to the law, I would need to refile my (domestic) California LLC as a foreign LLC operating in Colorado - resulting in double taxation, right?

Related questions:

1. Am I limited to only creating LLCs in the state that I reside in and how does this affect my ability to open business checking/credit accounts with a bank? 

2. What is the most effective method to make sure I am following the law as I purchase property that is NOT in California?

Not sure if this is important to note, but I will most likely be taking advantage of seller financing and will not need a conventional loan for 75-80% of the property's value. I see more opportunity to invest in landlord friendly states, so I plan on doing so! 

To everyone who has read through this far, I appreciate you and am eagerly looking forward to hearing your thoughts! 

Thank you,

Sahaj Bhakta

Aspiring Real Estate Investor