Jake Lawson here. This question hits my inbox at least twice a week, usually from real estate investors trying to optimize their setup. The short answer? Absolutely, your LLC can own property anywhere in the country. But as with most things in business formation, the devil’s in the details. Let me walk you through everything you need to know—including the foreign LLC trap that catches most people off guard.
The Bottom Line Up Front
Yes, an LLC formed in one state can absolutely own property in any other state. This is incredibly common in real estate investing, and I’ve helped hundreds of clients structure these deals properly.
In fact, I personally use Ohio LLCs to hold properties in multiple states. Why Ohio? It’s what I call a “sleeper state”—cheap formation fees, no annual reports, excellent privacy protections, and simple compliance requirements.
But here’s the catch everyone misses: depending on what you do with that property, you might need to register your LLC as a “foreign entity” in the state where the property sits.
What Exactly Is a “Foreign LLC“?
Before we dive deeper, let’s clear up the terminology that confuses everyone.
A “foreign LLC” doesn’t mean international. In business formation speak, “foreign” just means “from another state.”
Here’s how it works:
- Your Ohio LLC is a “domestic LLC” in Ohio
- That same Ohio LLC is a “foreign LLC” in Florida, Texas, California, and every other state
- If your Ohio LLC “transacts business” in Florida, it may need to register as a foreign LLC there
Related Article: Domestic LLC vs Foreign LLC
Think of it like this: you’re a resident of your home state, but a “visitor” everywhere else.
The Million-Dollar Question: What Counts as “Transacting Business”?
This is where things get tricky, and where most people make expensive mistakes.
For real estate LLCs, the easiest test is simple: Is the property making money?
You Probably Need to Register as a Foreign LLC If:
- The property is rented out and collecting rental income
- You’re running an Airbnb or short-term rental business
- You’re flipping houses and actively selling properties
- You have employees working at the property location
- You’re operating any kind of business from the property
You Probably Don’t Need to Register If:
- The property sits vacant (no income generation)
- You or your family live in it as a personal residence
- It’s a vacation home you use personally
- You’re just holding it as an investment without current income
- You bought it and immediately sold it without operating a business
The Real-World Consequences of Getting This Wrong
Here’s what happens if you need to register as a foreign LLC but don’t:
Immediate Penalties
Most states impose penalties ranging from $500 to $5,000 for operating without proper foreign LLC registration. Some states add interest and late fees that compound monthly.
Loss of Legal Standing
In many states, an unregistered foreign LLC cannot sue in state courts to collect debts or enforce contracts. Imagine trying to evict a non-paying tenant and discovering you can’t even file the lawsuit.
Back Taxes and Fees
Some states will demand payment of all the annual fees and taxes you would have owed since you started doing business there—with penalties and interest.
Personal Liability Exposure
In extreme cases, courts have pierced the corporate veil and held LLC owners personally liable when the LLC wasn’t properly registered.
State-by-State Foreign LLC Requirements: What You Need to Know
Every state handles this differently. Here’s what I’ve learned from helping clients nationwide:
The Expensive States
- California: $800 annual fee plus registration costs
- New York: $250 filing fee plus biennial reports
- Illinois: $750 initial registration plus annual reports
The Reasonable States
- Texas: $750 one-time registration fee
- Florida: $138.75 registration plus annual reports
- Nevada: $200 registration plus annual list filing
The Bargain States
- Wyoming: $100 registration, no annual reports
- Ohio: $99 registration plus biennial reports
- Indiana: $90 registration plus biennial reports
My Strategic Approach: The Holding Company Structure
For clients with multiple properties across states, I often recommend a holding company structure:
How It Works
- Form a holding LLC in a business-friendly state (like Wyoming or Ohio)
- Create subsidiary LLCs in each state where you own property
- The holding LLC owns the subsidiary LLCs
- Each subsidiary LLC owns property in its respective state
Why This Works
- Simplified compliance: Each subsidiary only deals with its own state’s rules
- Enhanced asset protection: Properties are isolated from each other
- Tax efficiency: Everything flows up to the holding company for consolidated reporting
- Flexibility: Easy to add new properties or sell individual assets
Practical Considerations: Banks, Title Companies, and Lenders
Working with Lenders
Most banks and mortgage lenders are comfortable with out-of-state LLCs owning property, but you should always check first. Some lenders have specific requirements about:
- Where the LLC is formed
- Who the registered agent is
- Whether the LLC needs to be registered in the property’s state
Title Company Issues
Occasionally, you’ll encounter a title company that’s uncomfortable with out-of-state LLCs. My advice? Find a different title company. This is extremely common in real estate, and any reputable title company should handle it without issues.
Insurance Considerations
Make sure your insurance company understands your LLC structure. Some insurers have specific requirements for coverage when properties are owned by out-of-state entities.
Tax Implications: What You Actually Need to Know
Federal Taxes
Your LLC’s federal tax treatment doesn’t change based on where it owns property. A single-member LLC remains a “disregarded entity” regardless of how many states it operates in.
State Income Taxes
Here’s where it gets complex:
- The state where your LLC is formed may want to tax all income
- States where properties are located typically want to tax income generated there
- Your home state may also want a piece of the action
This can create multiple tax filing requirements and potential double taxation issues. Always consult with a CPA who specializes in multi-state real estate taxation.
Common Scenarios: Real Examples from My Practice
Scenario 1: The California Investor
Client: Lives in California, wants to buy rental property in Texas
Challenge: California’s $800 annual LLC fee is expensive
Solution: Form Texas LLC to own Texas property, register as foreign LLC in California only if required based on management activities
Scenario 2: The Snowbird Retiree
Client: Ohio resident with vacation rental in Florida
Challenge: Property generates short-term rental income
Solution: Register Ohio LLC as foreign LLC in Florida due to active rental business
Scenario 3: The Multi-State Portfolio
Client: Investor with properties in 5 different states
Challenge: Complex compliance across multiple jurisdictions
Solution: Wyoming holding LLC owning subsidiary LLCs in each property state
My Recommendations by Situation
Single Property, No Income
Keep it simple: Use your home state LLC, no foreign registration needed.
Single Property, Rental Income
Two options:
- Form LLC in property state to avoid foreign registration
- Use home state LLC and register as foreign entity in property state
Multiple Properties, Multiple States
Go with holding company structure: Holding LLC in business-friendly state, subsidiary LLCs in property states.
High-Value Portfolio
Add series LLC consideration: Some states allow series LLCs where each “series” can own different properties with separate liability protection.
The States I Recommend for Real Estate LLCs
Wyoming
- No state income tax
- No annual reports
- Excellent privacy protection
- Strong LLC statute
- $100 formation fee
Ohio
- No annual reports
- Privacy protection available
- Reasonable formation costs
- LLC-friendly courts
- $99 formation fee
Delaware
- Business-friendly courts
- Well-established LLC law
- Good for complex structures
- $90 formation fee
- $300 annual franchise tax
Red Flags to Avoid
Don’t Ignore Registration Requirements
“I’ll just fly under the radar” is not a strategy. States are getting better at tracking business activity, especially rental income that shows up on tax returns.
Don’t Use Your Home State Just Because
California residents forming California LLCs to own Nevada properties are missing significant savings opportunities.
Don’t Overcomplicate Simple Situations
If you own one rental property, you probably don’t need a complex holding company structure with multiple LLCs.
Don’t Assume Your CPA Knows LLC Law
Many accountants are great with taxes but don’t understand the business formation implications of multi-state property ownership.
Frequently Asked Questions
“Can my LLC own property internationally?”
Generally yes, but this gets much more complex. You’ll need to understand foreign ownership laws, tax treaties, reporting requirements, and potentially FBAR filings. Consult with attorneys who specialize in international real estate.
“What if I move to a different state after forming my LLC?”
Your LLC stays where you formed it. Moving doesn’t change your LLC’s state of formation, but it might affect where you need to file tax returns and register as a foreign entity.
“Can I use a virtual address for foreign LLC registration?”
Depends on the state. Some states require a physical address within their borders, others allow registered agent services with virtual addresses. Check specific state requirements.
“What happens if I sell a property owned by an out-of-state LLC?”
Typically nothing special. The sale proceeds flow to your LLC regardless of where it’s formed. However, you may have state tax filing requirements in the state where the property was located.
“Is there a way to avoid foreign LLC registration entirely?”
Sometimes. If you structure ownership so the LLC truly isn’t doing business in the state (just holding title without generating income), you might avoid registration requirements. But this is highly fact-specific.
The Bottom Line: Making Smart Decisions
Can an LLC in one state own property in another? Absolutely. Should you structure it that way? It depends entirely on your situation.
For most single-property investors, the decision comes down to:
- Cost comparison: Formation and compliance costs in different states
- Tax implications: State income tax and filing requirements
- Asset protection goals: How important is privacy and liability protection
- Future plans: Will you acquire more properties?
My general rule: If you’re serious about real estate investing, invest the time and money to structure things properly from the beginning. The savings in taxes, compliance costs, and headaches will pay for themselves many times over.
For simple situations: Don’t overthink it. Form an LLC in the state where the property is located and keep life simple.
For complex portfolios: Seriously consider the holding company structure with professional legal and tax advice.
Planning a multi-state real estate investment strategy? I’ve helped hundreds of investors structure their LLCs for maximum protection and minimum compliance hassle. Every situation is unique, and the “right” answer depends on your specific goals, budget, and timeline. Get the structure right from the beginning—it’s much easier than trying to fix it later.