Where the Property is Located – If the Property is located in Arizona, it is generally prudent to form the LLC in Arizona. If you form an LLC in another state (e.g., California), and you want to use that LLC to own investment real estate, you will still be required to file an application for Registration of a Foreign Limited Liability Company to transact business in Arizona.
Fees – While the filing fees for the Articles of Organization are comparable in both Arizona and California, the State of California imposes an annual minimum fee of $800. There are no additional annual fees for an LLC formed in Arizona.
In some instances, these additional fees alone make forming an LLC in California cost-prohibitive. As you can see, the cost of forming and maintaining an LLC in California is significantly greater than the cost in Arizona.
Asset Protection – When purchasing multiple properties, it is generally prudent for an owner to form a separate LLC to own each property. This will maximize an owner‘s asset protection. Separate ownership will isolate the equity in each property from potential claims brought against other properties.