This is a very common question, the answer to which can make a big difference in your tax liability and your cost of doing business, as well as your asset protection. Our student, Mindy, asks it this way:

Q: Hi there, We are just starting out...we live in California but own property in Nevada. We want to invest in and eventually hold real estate. What would be the best place state to start our business... and S corp or LLC state? Thank you.

A: You should definitely form your LLC in Nevada for your real estate that you own in Nevada. I would also suggest you form your LLC for your business in Wyoming or Nevada if you are ever planning to leave California. This way, you can take your entity with you when you leave California and stop paying California’s $800 minimum tax.

You should speak to my friend and fellow Rich Dad Advisor, Garrett Sutton, about whether to form an S corp for your business or an LLC taxed as an S Corp while you are doing business in California. Garrett is an asset protection attorney and can best advise your regarding the challenges of LLC’s in California. You can contact him at www.sutlaw.com.

Warmest regards,

Tom