Today TaxMama hears from Tom in Upland, CA who wants to know, “I live in So. Cal. and am considering an LLC. I want to set-it-up in NV and do business in CA. I do land development and also sell real estate. Is this the best way to go for liability protection and the tax benefits?”
Since you live in California AND your work is in California, you will have to register your Nevada LLC in
California and pay all the California fees.
Be very careful about setting up an LLC in California. There are gross revenue taxes on LLCs in California.
In California, to own real estate you’re better off with a Limited Partnership. You can have your Nevada LP or LLC as the general partner.
Generally, I discourage people from opening Nevada corporations. But, recently, I have learned about one reason why Nevada LLCs or LP’s might be interesting – and that’s from a wealth protection standpoint.
There’s something called a ‘charging order’, which lets folks who get judgments against you attach your assets. In a Nevada LLC or limited partnership with at least two partners, the Members or limited partner’s assets can be protected. Your creditors can receive any distributions your company makes to you as a partner or member, but they won’t own or control your business – or be able to compel a distribution.
There’s a little more to it than that. And there is a strategy that would make this work, without subjecting yourself to California Gross Revenue taxes. If you’re interested in a consultation, I can put you in touch with the folks who explained it to me. I was impressed with their logic.
There are about 6 states whose laws provide you protection from charging orders. Nevada is just one of them.
So…hmmm…there may, in fact, be a good reason to incorporate first in NV…
And remember, you can find answers to tax questions about business structures and all kinds of tax issues, free. Where? Where else? At TaxMama.com
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