I live and do business in CA. I got a NV LLC. Still not sure if this was the best way to go, but I’m wondering if i really need to be paying $300 a year to they guys in NV to maintain my LLC, on top of the $800 I pay to CA every year.
Is it easy enough to do myself from CA, or should I just move it to CA. I already started building credit under the name and EIN so I’d rather not lose all that.
Thoughts? Opinions?
Thanks in advance everyone!
Naj -
There’s many components to keeping your LLC alive as you well know. Some things are actually quite simple to take care of, like filing an LLC or annual members form, both of which are done online. On the other hand sorting out requirements for related licenses, and taxes can be much more confusing.
When you have an out-of-state company you need, for example, a registered agent to handle mail on your behalf. It’s not a $300 service but it’s required to stay in good standing.
The difficulty of course is that you think when you hire someone for all these things, they do them, but if you look at most LLC registration services, they’re so focused on price that they fail to mention little things like business licenses that end up doubling costs or even worse, being ignored entirely.
As for where you should locate your corporation. That’s not easy to say and something where good advice is worth it’s weight in gold. Depending on how you operate, who you hire, what you earn it can make differences and open you up to a lot of other liability.
You can keep the EIN, that part is easy. The states aren’t really concerned with the EIN, that’s the Fed. So, when you convert/redomocile/move your corp to another state you can just file a document that tell the IRS that you are changing the location but keeping the EIN - the form calls it a reorganization and it’s easy enough to find. You can just file it with the next return after moving.
Moving a corp is a different story. Each state is different. In some states, it’s easy to convert in. In others, you have to do a new entity and merge in, etc.
If you live and work, and do business in CA there aren’t any good reasons to hold a NV LLC unless you are going for shielding, privacy, nominee directors, etc. There are also some tax dances you can do, i.e. shifting income to be paid under NV payroll for part of the year to avoid CA taxation and get better personal tax treatment, etc. But it doesn’t sound like you are doing those things.
Since you have to register as a foreign corp in CA anyway (you are registered, right??) you are probably paying more to hold the NV LLC and not taking advantage of any of the benefits.
My advice would be to first consult with your tax advisor to ensure that this is a good idea (it probably is). Then find out what is involved in converting domiciling a NV LLC into CA, and act accordingly.
You can use services like LLC or The Company Corporation to help you with these things, but they won’t really provide legal advice. Spending 2 or 3 hundred on an attorney is almost always worthwhile. Typically, you should able to operate the LLC on your own so it doesn’t seem worth paying hundreds for that service.
What I am most concerned with is keeping the business credit I have built up. I have a doze business credit cards and trade lines open under this LLC. Its really important to me to keep these open and off of my personal credit report no matter what i decide to do with the LLC.
If I move the Nevada LLC to CA what will happen to the business credit and the debts?
What if I just close down the LLC all together and operate as a sole proprietor still keeping a clear distinction between my business and myself? I really don’t need the “corporate veil” thing right now anyway, and from what i hear CA’s corporate veil is laughable, and Nevada can’t protect me in CA.
Will all these business debts get moved to my personal credit file if i move from LLC to Sole Proprietor?
Right now I only make the business decisions and operate out of CA, but I have not done any business in the LLC’s name. The business plan is basically to own/operate a bunch of rental properties. I have one rental property, and neither the lease agreement nor the property itself are in the LLC’s name.
I see myself pouring money into this LLC and am wondering if there is a better/cheaper way of doing things.
You can move the entity from NV to CA, and keep the EIN (if you do it right). The IRS isn’t concerned with where your entity is domiciled, you just send them a form saying you’ve reorganized in a different state and then continue using the EIN.
If you are operating only in California and are not trying to shield/protect assets or maintain confidentiality there is usually little gain by operating as a NV LLC.
With that out of the way, I urge you to get legal/tax advice right away because some of your comments are alarming to me. For example:
I dont see how you’ll be ‘pouring money’ into the LLC. CA isn’t a cheap state to operate in, but unless your properties are going to be under 10k the LLC should be the least of your worries.
It sounds like you should be putting money into the Nolo Press before doing anything more. I did business in CA for 17 years and let me tell you, the FTB doesn’t plan games and if you are sloppy you are going to pay out the nose.
What is Nolo Press?
-Naj
Getting advice is what i am doing now 
regarding the numbered comments above:
like i said i have been building business credit. As I’m sure you know to build credit you need to have credit. Rest assured I’m not up to my eyeballs in debt, and use all these trade lines responsibly. 6 of them are actual business credit cards with banks. The rest are trade lines with specific websites and a couple of gas fleet cards.
alright noted
also noted
None of the above mentioned debt appears on my personal credit report on any of the 3 big bureaus. Doesn’t that mean I did not personally guarantee that debt? They did do an inquiry on my personal credit but that is about it.
I guess it depends on the legal definition of “doing business”. I opened the credit cards and trade lines while living in CA. The statements all come to my CA address, if not to my business email inbox (separate from my personal email address). Any purchases (usually gas), come to my CA address, and the more I type this the more it does sound to me that i do business in CA. What do you think?
I know the basics about the corporate veil. Keep business and personal finances separate, and people can sue me personally or the business. Not both.
I tried really hard to get the mortgage and the property under the LLC, but mortgage broker practically told me that i could not get the mortgage for the property with the LLC on the application.
I can always quit claim the property to the LLC, but I thought it would be muddying business with personal because I could not get the mortgage under the LLC. As for the lease agreement, I was strongly urged NOT to put it in the LLC’s name because should anything go to court, I would be required to hire a lawyer to represent the LLC in even the simplest of court cases. Basically, against all my protest every one who knows better than me said to keep everything regarding that rental personal.
I’m really trying not to do sloppy business, and i recognize that there is some clean up. I’m hoping that simplifying the business (since it is really small right now) will not only clean it up but reduce costs.
New question: I both myself and my LLC are on a mortgage debt to a rental property, is that mixing personal with business?
Yea that’s as mixed as you can get. If you only guaranteed the loan, that’s not as bad but pretty mixed. If you are both named, that is just a mess.
The best way to do it is to simply have the LLC obtain financing on it’s own, but it doesn’t sound like you are in a position to do that. The next best thing is to quit-claim (or whatever process) the deed from yourself to the LLC then transfer the mortgage over while dropping the guaranteed. You also need good credit and a seasoned LLC for that. So, what many real estate investors are left is a property wrapped in an LLC (which is good) but a mortgage that they are guaranteeing (which isn’t as good).
It took me about 10 years to get my corp to the point where I could get a mortgage through it. Money is very tight now.
You right in that my LLC is not in a position to obtain its own mortgage.
but am i right in understanding that i can get away with my LLC gettting a mortgage with me personally guaranteeing it? I think that is doable.
-Naj
Yes, although some lenders will balk at that depending on how much substance/nexus/history/credit your LLC has. If you are the sole member of the LLC and are personally guaranteeing the loan, then there is little benefit to naming the LLC on the loan, really.
Please elaborate a little. There is benefit to personally guaranteeing the loan for my LLC?
I’m thinking having a mortgage on my LLC would do wonders for its credit, and I would be able to put the title and lease agreement in the LLC’s name without mixing personal with business. Meaning I’d finally have the entire rental under my LLC, with the exception that i am personally guaranteeing the loan.
It seems like you are preoccupied with the idea of getting business credit - what is the big deal about that? Credit, in general, is something that kills more businesses than drives them and the more you use credit the more you have a risk of your business falling apart. Many people claim that borrowing is ‘how certain business work’ but statistically it’s not true and the most successful businesses are flush with cash.
Who cares about your business credit? The point of your business should be to make money, not pay interest on borrowed money. If you take a loan out and the LLC can qualify (difficult) then great, if not then you may have to guarantee the loan personally. You can’t name an LLC on a loan and just guarantee the loan in most cases, you have to just take it personally and quit the deed to the LLC.
But again, I would be focusing on what your business is going to do to make money rather than worrying about business credit.
when i say credit i mean the business credit score, and the amount of credit lines available to me. I want to buy more properties, some i rent out others i quickly flip. In either of these cases i need the capital and i get the capital from all these different credit lines.
I would love to be an all cash business, but I sadly I’m not that well off. This is why the credit score is important to the business at this time, i need to be able to borrow the cash/capital needed to do business and make money. Its a slippery slope, but as long as i have my numbers straight and account for the costs of borrowing money I’ll be good.
Well, there is no shortage of people in the real estate business who are heavily leveraged and try to ‘have their numbers straight’. But, without a reasonable amount of working capital the statistics are against you so be careful. Getting the numbers straight isn’t as easy as it sounds, and lack of capital is the #1 reason that real estate ventures go under.