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CalAttorney2
CalAttorney2, Attorney
Category: Business Law
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Experience:  I am a businesses law attorney, with experience advising and representing owners and investors.
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Form a Serious LLC to buy real estate in New York State. I

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Form a Serious LLC to buy real estate in New York State.

I am a Canadian planing to invest several rental properties in New York State. I learned for some reasons like liability and tax, it is the best to form a LLC to buy rental property.

Which State to form my LLC. I learned that the best State to form a LLC is Delaware. But it seems it does not apply to me because I invest in New York State. Whenever a LLC transacts business in a particular state, it must register with that state. This means that it has to pay taxes in that state and file reports, just as if it was actually formed there. I do not save money at all if I form my LLC in Delaware. Right?

I want to form a series LLC (having multiple different LLCs under one LLC, and I only have to pay one LLC fee). Because I may invest in other properties in US (under different LLCs) the LLC will isolate the other property and my liability will only be limited to this property. However, it seems that New York State does not allow to form a series LLC. So for every rental property in New York State, I have to form a new LLC?

And, in order to open a bank account for my LLC, I have to real physical address (not my rental property address) in New York State. How do I solve this problem?

Attorney William B. :

Dear Customer, thank you for choosing Just Answer, I would like to assist you today.

Attorney William B. :

It is true that in most cases it is most direct to form the LLC in the state in which you plan to conduct your business, particularly when you are dealing with real property. You can form a master LLC, then form sub-LLCs for each property. This will isolate liability for each property that you own (assuming you carry reasonable insurance or have reasonable assets to protect potential creditors in the event of claims). This is done with most largescale real estate investments.

Attorney William B. :

You will need to pay a fee for each LLC that you open, but for the type of business plan you are proposing, this is a negligible fee.

Customer:

I do not save money at all if I form my LLC in Delaware. Right?

Customer:

because I invest in New York State.

Attorney William B. :

Most business investments such as the one you are describing will retain a property manager or legal counsel which can act as their "physical address" for accounting, banking, and regulatory purposes (remember the LLC is an entity separate and apart from its members).

Attorney William B. :

I cannot tell you for certain that you specifically will not save money by not creating your LLC in Delaware (remember, I cannot give specific legal advice, only an attorney that you retain in person to give you that advice can answer that question), but in general you will not save enough money to make an out of state LLC worthwhile for businesses conducting real estate transactions.

Customer:

It seems that New York State does not allow to form a series LLC. So I have to form a LLC for each rental property in New York State?

Attorney William B. :

Most real estate investments are formed in this manner regardless of state regulations in any event. This shields one investment from the others (for example if a fire in one development causes it to go bankruptcy, that LLC's misfortune will not affect the remaining LLCs - assuming reasonable insurance, etc.).

Customer:

New York State does not allow to form a series LLC?

Attorney William B. :

You can use sub LLCs or "series LLCs" in New York. Another expert's post on this site confirms this use (in fact early corporate liability law drew from this type of fractured liability): http://www.justanswer.com/business-law/3twer-delaware-series-llc-s-honored-ny-law.html

Attorney William B. :

I hope that my answer was of assistance to you. My goal is to provide you with excellent service – if you feel you have gotten anything less, please reply back, I am happy to address follow-up questions. Please remember to rate my service once you have all the information you need. Thank you for your business!

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