Can an out-of-state LLC own property in another state?
Yes, an LLC in one state can own property in another, generally speaking.
This is very common in real estate investing and holding property.
For example, for properties that aren’t earning rental income, I personally use Ohio LLCs to hold real estate (in states other than Ohio).
(Why? Ohio is a “sleeper state”. Super affordable, very easy paperwork, LLCs in Ohio are private, and there is no Annual Report.)
However, there are a few things to be aware of.
Do I need to register the LLC as a “Foreign LLC”?
A Foreign LLC is simply an LLC formed in one state that “transacts business” in another state.
For example: An LLC formed in Ohio is a “Domestic” LLC in Ohio. But if that Ohio LLC “transacts business” in Florida, it’s known as a “Foreign” LLC in Florida. And likewise, it’d also be known as a “Foreign” LLC in any/all other states where it “transacts business”.
However:
- the laws that define “transacting business” can be vague
- not all states strictly enforce the need to foreign quality (register as a Foreign LLC)
- the penalties for failure to foreign file may not be that bad in your state
- and if the LLC isn’t “transacting business” then
How do I know if my LLC is “transacting business”?
For real estate LLCs, the easiest way to determine this is whether or not the LLC is earning income in that state.
Said another way, is the property rented out and collecting money from tenants?
If so, then all states will consider the LLC “transacting business” and they’ll want the LLC registered as a Foreign LLC.
However, if the LLC isn’t earning income (for example, the property is sitting vacant, you/family live in it, it’s a personal vacation rental, etc.) then you don’t have to foreign-qualify the LLC.
What about the lender?
If you aren’t using financing, then this won’t be an issue.
However, if you’re working with a bank or lender, check with them ahead of time to see if they care about out-of-state LLCs owning property.
What if the title company creates a fuss?
If you aren’t using financing, and the title company is creating a fuss, honestly, I’d find another title company.
Out-of-state LLCs owning property is extremely common (and legal), so if a title company is creating an issue for you,, I’d move onto the next.
Can an LLC own another LLC in another state?
Yes, an LLC can own an LLC in another state.
For example, let’s say you have a Wyoming LLC. That Wyoming LLC could own an LLC in Ohio. And that Ohio LLC could own property in Ohio (or in any state).
This is common among real estate investors with multiple properties.
Summary
In summary, an LLC in one state can own property in another, however, you should:
- determine whether or not it’ll be “transacting business” (in the state where the property is located)
- the lender cares
- the title company cares
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.
Matt, we are a Wisconsin LLC selling a residential rental property in Wisconsin and planning to buy a similar property in Texas or Florida under the same LLC with a 1031 exchange. While we plan to live at the new property during the winter season, we intend to rent out the property under short term rental with the help of a property management company when we are not there. I would greatly appreciate it if you could clarify a few points (1) Do we have to register as a foreign entity in Texas/Florida? (2) Do we need to have a registered agent living in Texas/Florida? (3) Do we have to pay tax in Wisconsin even though Texas/Florida has no state tax? (4) Do we have to pay sales tax on rental income in Texas/Florida? (5) Is it better to buy the new property under our personal name as a second home or buy it under our Wisconsin LLC as an investment property? Thanks.
Hi Zach, there’s a few ways to “slice this pie”. I’ll answer your questions in my next reply, but wanted to zoom out a bit, and think ahead. Do you plan on buying more real estate in the future? If so, do you know in what states? Also, do you typically use financing to acquire property? And are you more concerned with getting a good mortgage rate (ex: buying in your personal name) or added liability protection and privacy (ex: buying in an LLC). I ask because if you want to use your Wisconsin LLC to buy (and more importantly, rent) real estate in Texas, then yes, it should be registered as a foreign LLC in Texas (which is $750). I’ll add more about your questions in my next reply.
I own two properties in New Jersey that I rent out. There are mortgages on both. I now live in Ohio and was encouraged to setup an LLC. Should I setup the LLC in Ohio or New Jersey?
Hi Jodie, what will this new LLC be for… to take title to both properties? If yes, do you plan on buying more real estate over time? And if so, in what states? I also recommend speaking with you lenders regarding transferring title from yourself to your LLC.
Ohio LLC sold a property owned in Florida for capital gain. That is presumably “transacting business”; what are the implications?
Hi Angelo, if the LLC has been income-producing, this is considered “transacting business”, and the Ohio entity is supposed to be registered as a foreign LLC in Florida. If the LLC simply bought the property, did nothing with it, and then later sold it, this would likely not be considered “transacting business”. Transacting business (or rather the lack of transacting business) is defined in Florida Statutes, Section 605.0905 (and any relevant case law). Hope that helps.
Hello,
I have a series LLC register in Illinois. This LLC owns a number of investment rental properties in Chicago. Can I buy an investment property in Bogota Colombia and have that property owned by my Illinois LLC. What will be the tax implications of this Illinois LLC owning an investment renal property in Colombia? Thank you.
Hi Saeid, regarding the tax implications of this, I’m not sure. As far as Illinois is concerned, they don’t care about where you own property. I think the real question is about if the local municipality in Bogota cares (or if there’s additional requirements). I wouldn’t think so, but I have no experience here. Thank you for your understanding.
Is it legal for an out of state LLC to advertise themselves locally owned while facilitating trusteeship of a land contract that has the beneficiary sign a CONTRACT FOR INSTALLMENT SALE OF BENEFICIAL INTEREST IN LAND TRUST provided by a seperate PMG. But still advertising themselves as selling property.
Hi Ryan, I’m not sure. This is a bit beyond the scope of what we can assist with. Thank you for your understanding.
Question: I live in California, but have a second home in Lake Havasu, Arizona. We just aquired an investment rental (also in Lake Havasu). I want to form an LLC in Arizona (for asset protection purposes). Can I form an Arizona LLC, so I do not have to pay the steep California LLC fee’s ($800/yr) for my rental and use my second home address as the mailing/contact address?
Hi John, yes, you can form an Arizona LLC (and transfer ownership) for your Arizona property. If you have a mortgage in place, you might want to check with the lender first to see if they’re okay with the transfer. It’s a bit of a gray area as to whether or not you need to register the Arizona LLC as a Foreign LLC in California (also see LLC doing business in California). Technically, you’re supposed to, but it’s not always enforced. However, the California FTB can impose penalties for non-compliance. I wish I could give you a more black-and-white answer, but to be honest, California is a pain in the neck. Thanks for your understanding. Hope that helps.
Thanks for the reply Matt! I think Im gonna just leave it alone and bump up our liability protection. Seems like more of a pain to do an LLC.
You’re welcome John! Great idea. Keep it simple, yet you still have protection.
We are selling our house in Alabama to an LLC company in Florida. They want people to see our home before we close the deal with them. Is it legal for an out-of-state company to purchase a house in another state and do we have to show our home to potential buyers as they attempt to sell our home?
Hi Michael, while yes, it’s common for an out-of-state LLC to take title to a house in Alabama, what it sounds like here is that you are dealing with a real estate wholesaler. Meaning, after you sign a Purchase Agreement with them, they actively find the “end buyer” and they assign (transfer) the rights of the contract to them for a fee. That’s how the wholesaler makes their money. And the end buyer makes out (typically) because they are getting a discount from market rate. If you use a reputable title company, there shouldn’t be any issues. However, it’s also good to know who you’re doing business with and what’s occurring.