Delaware LLC

General Real Estate Investing
1

Hi.

I set up my LLC in Delaware. Are there any disadvantages to this over setting it up in Texas? If the negatives are substantial enough, I guess I could refile here, but I did it in Delaware because I was told that they didn’t require 2 people to form.

2

A DE LLC needs to pay annual fees in TX (when you register it in TX) AND DE - that’s the downside. I wasn’t aware that TX does not permit single member LLC’s (I will check on that)…you could always have another entity or person act as a member, though that would have downsides of its own.

John Hyre

3

Thanks for the response, John. I thought everyone had forgotten about this post. :slight_smile: I guess I should have checked out the double filing fee before I formed the LLC. It’s another $500!!! I guess if I’m making good money it won’t matter, but if I would have done my due diligence, I probably would have just filed in TX and made my wife the other member. :-\ Live and learn.

Oh, I know this wouldn’t be actual “legal” advice, but is it worth disolving my Delaware LLC and reforming TX?

4

I am not a lawyer, but if I were in your shoes, I’d shut down the Delaware LLC and re-file in Texas. The fee for a “foreign” corporation or LLC is an annual fee that is charged whether you make a profit on not if I recall correctly. When I was setting up my Corp, I was going to do use a foreign entity (ie a Utah Corp), but I couldn’t justify the yearly fee if I didn’t make a profit.

HTH
Wilson

5

Thank for the advice, Wilson. That’s what I believe I’ll do. Just wish I had known about this forum before I spent the $329. I was just trying to rush into everything. Thanks again.

Jessie R. Van, Jr.

6

I feel like I’m in a bad dream. It is $300(100 fee + 200 tax) to dissolve the llc in Delaware, at least $200 to file again in TX.(plus agent fee) Is possible to keep the DE LLC and just not do business under it? Also, can I have 2 separate business names, with 2 separate tax ids?

Jessie R. Van, Jr.

7

Jessie,

I can’t offer you any advise about the Delaware LLC, because I have not ever been involved with them in any way. You might check into the taxes and fees to see if there are any on an LLC that produces no income and make a decision from there.

Wilson

8

Wilson,

I have to pay the minimum $200 to DE whether I do anything or not. What I think I’ll do is form here in TX, then just sometime before the DE taxes are due, dissolve it and pay the tax plus fee.

Jessie R. Van, Jr.

9

I’d probably dissolve the DE LLC and have done with the excess fees. What’s gone in to this point are sunk costs. Some posters might suggest keeping the entity for potential future use. Were it a NV entity with the potential to be filled with mobile assets (e.g. - stock, cash, not RE), I might be tempted. DE is a good state for large companies to file in…but I do not see much benefit for small to medium sized RE investors. As such, I see little liklihood that you will ever need that entity.

You can of course keep the entity and resign yourself to paying both states’ fees. Whichever option is cheapest is the way I’d go. This is annoying and on the expensive side, but not a make-or-break issue.

Remember, education up front is much cheaper than the school of hard knocks - but we are all going to make mistakes from time to time. That’s part of business and part of life.

John Hyre

10

Thanks John. I got suckered in by a guru’s advertising of forming through a particular company in DE regardless of what state I’m in. Should’ve know better, not usually this gullable. Going to end up being a $800+ lesson, before even looking at a property. Have a great day.

Jessie R. Van, Jr.