What state to form an LLC

At the bootcamp, Frank said to have an LLC just for the property, and an S Corp for the manager. He also said it doesn’t matter what state the LLC is in, just look at how foreign entities are taxes in different states. I’ve heard Delaware mentioned a lot. Anyone have a recommendation on where to form the LLC?

Now that I think about it, its not really going to matter, because the cash flow wont be taxed at all because the interest and depreciation deductions are not too much less than the cash flow, plus I have passive suspended losses anyway. So…shouldn’t matter.

I think the property LLC should be in the state of the property unless there’s a good reason not to.


Agree with @Brandon. There are foreign franchise taxes and filings that happen with out of state entities. Until you’re a certain size incorporating out of state does not make sense.

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In CA you’re required to have an LLC here and have your out of state investment property under it as a foreign entity - so every year I get to pay CA $800 just because I’m running the operation from CA. Check with your local SOS to see what they may require.


Most banks will require an in state LLC for a loan.

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Delaware will allow the owner of the LLC to be anonymous, which other states may not allow. I personally live in Delaware and my office is based here, yet I do not setup LLC in this state for ownership of property in other states. If you organize in Delaware or any other state, yet operate in a different state, you will have to file for foreign registration. Thus, you are paying both states to keep your entity alive. Also, Delaware is expensive. The franchise tax is $300 per year but in other states it is much less. When we buy parks, we form an LLC in the state containing the property.

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Unless privacy is a concern there is usually no tax benefit to forming an LLC in a particular jurisdiction because doing so won’t allow you to avoid many taxes.

And if privacy is your goal there are costs to being anonymous. And you’ll never be able to stay anonymous from your bank or the government.


Form the LLC in the state the property is located in. Anything else is a needless hassle and additional effort for no particular benefit. I say this as a CPA with decades of experience.