I own investment property in Texas and I live in California. Should I put the property in a TX or CA LLC?
Since there is no state income tax in Texas, I thought Texas might be better. I did hear that having an LLC in Texas is expensive and there is a State Franchise Tax charged. I really want to know what the best path is to pay the least amount of taxes on my profit.
Public Comments
- California has an $800 annual franchise tax. If you use a "foreign" (i.e., out-of-state) LLC you will almost certainly have to register it in Texas anyway, and then pay the Texas tax. The Texas franchise tax rate on taxable capital is 0.25 percent per year of privilege period. Normally you would only use an LLC for liability limitation (there might be business reasons, but they're not obvious from your posing). You might want to see if insurance would be cheaper than the franchise tax; then you could use a partnership; or a limited partnership. You may find the following comparison table helpful: http://www.nvinc.com/analysisllc.htm
- The state franchise tax in Texas is pretty low. I believe there is no tax on $100,000 income or less. The tax on about a million dollars around $850. There is a formula that shows you what the state franchise tax will be at www.window.state.tx.us Andy's link above to the State of Texas is the information for the old franchise tax law. Texas just changed the franchise tax law this year and they have the new calculator at the top of their homepage.
- pay the taxes in texes
