The process of qualifying entail submitting out-of-state articles of organization, a certificate of good standing from the state of formation, and a fee to the business state secretary of states office.
Typically pay the same fee for qualifying that you would have paid if you had set up the entity in the business state to begin with. Texas, however, is one state that charges out-of-state entities more in fees and it does in state Or Texas found entities.
Of course, the consequence of qualifying is that now the business state has a way to tax you with things occurring within their borders which is why states Assess some high fees if you failed to qualify.
In California the penalties can reach up to 12,000.
Many states will not allow the filing of the lawsuit in their court unless you have a properly qualified business in their state. These are referred to as closed door statues and like the significant financial penalties, can be quite complicated. In the event of a lawsuit, which states long will apply.
Will it be the business state, and this example California, or the outside formation state, which in this case is Wyoming.
The answer is: it depends.
The reason one: a lawsuit was filed by one of the tenants in your four Plex. The tenant says to have fallen down a flight of steps that we were improperly minting because because the attack involves California real estate, the courts in California have held that California law applies. If the tenant is successful in court the insurance company finds a reason not to come the claim, the tenant could force a sale of the four Plex to satisfy the claim.
This is the outcome in most states for most cases. If an LLC was not use the outcome could have been worse. The tenant could have reached all of the owners assets, personal assets.
Reason two: in a second attack a lawsuit is brought against the owners by individual or company over a matter unrelated to the real estate. In America it may be a A case completely without merit. The attacker wants to satisfy by getting the owners real estate holdings.
California has the weakest asset protection law available. If the LLC was formed under California law, the attacker would have the ability to pierce through the LLC and force the sale of the four Plex. But forming the entities in Nevada and Wyoming, it is arguable that those laws apply. Both states feature outstanding charging order protection. Californian now provides that if you are doing business in California, then California law applies no matter where the entity was formed.
The exception has to do with internal corporate, where the law of the state of formation applies. California’s laws are always changing so check the recent updates at www.corporatedirect.com/California.