My husband and I are NJ residents forming LLC with a couple who are Florida residents. We are trying to figure out which state would be best to form the LLC in. Our investment properties are in Florida. Is it determined by residence or where the real property is located?
You can organize in either state or you could organize in a state like Delaware. If the properties are in Florida you are going to have to register in Florida as a foreign LLC even if you organize in NJ. Therefore, it is probably easiest to organize in Florida.
The business enterprise state of organization is really unrelated to where assets are, or can be.
I would urge you to have a good operating agreement crafted since there are two couples involved. Even amicable relationships sometimes have conflicts in a business setting and the agreement will address most issues in advance. Also, you can determine which state law will govern the agreement.
Without knowing the advantages or disadvantages of forming an LLC in Florida v. forming it in New Jersey, from a practical point of view, it is definitely simpler and less expensive to pick Florida as the state of formation.
In the event you determine Florida is the preferred choice, you should have separate counsel to prepare the Operating Agreement, or if your attorney does not prepare the Operating Agreement, you should have separate counsel to review it. which will contain the governing terms between you and your Florida partners for running the LLC.
If you are considering more than one investment property, you might also consider utilizing separate LLC's for each Property. By doing so, you will shield each property from liability arising in connection with the other property.
I think both the previous answers overlook a provision in the Florida LLC act which permits a non-Florida LLC to engage in certain activities without having to register in Florida. The Florida act sets out that a "foreign" LLC must register before doing business in Florida, but then goes on to spell out a series of activities which do not constitute doing business. Florida Statutes, Chapter 608, Section 501. One of these is (m) ownership "without more" of real or personal property. So an LLC formed as a holding company in another state would not have to register in Florida. This opens the door to investigation of the relative costs and consequences of forming in a number of other states, not just New Jersey. Two states with very low fees are Connecticut and Colorado. Where ever you form your LLC, you will need a "registered agent." Since you live in NJ, you could act if you form there and your partners who live in Florida could act if you form in Florida.
Previous answers have mentioned the importance of a well and fairly drafted operating agreement, and I certainly agree. Be sure to think ahead to time when one of the owners dies, becomes disabled, or wishes to withdraw from the company. Think about how this can be accomplished that is fair to all.
Think about who will have responsibility for oversight of the property. Will they be compensated for this? Be sure to include a provision which permits you to hold legally binding meetings by telephone to minimize trouble and expense in operating the LLC.
Answering your question on AVVO, does not create a lawyer-client relationship between us. I am not licensed to practice in Florida, and I don't practice law in Florida. You need to confirm my answer with a Florida attorney.
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