California LLC for Real Estate — Formation & Structuring

Real estate investing in California requires careful LLC structuring because California does NOT offer Series LLCs. Each property needing separate protection requires its own LLC — at $800/year per entity. This makes California the most expensive state for multi-property real estate portfolios. See our CA LLC guide.

The $800 Problem

Cost of holding 5 properties in separate LLCs:

• 5 x $800 = $4,000/year in franchise tax alone
• Plus $20 SOI per entity every 2 years
• Plus agent for service of process per entity
• Plus potential LLC fee per entity if income >$250K

Compare to Texas: 1 Series LLC = $300 one-time, $0/year for all properties combined.

Structuring Strategies for CA Real Estate

1. Group properties by risk: Put 2-3 lower-value residential properties per LLC. Only separate LLCs for high-value or high-liability properties.
2. Single LLC with umbrella insurance: One LLC + $1M-$5M umbrella policy. Cheaper but less protective.
3. Out-of-state Series LLC: Form a Texas or Wyoming Series LLC for properties located outside CA. For CA properties: no escape from CA's per-entity $800.
4. Delaware LLC holding: Some investors use Delaware LLCs for CA property (for governance benefits) but still owe CA $800 per entity.

California-Specific Real Estate Considerations

• Prop 13: Property tax assessment in CA is based on purchase price (not market value). Transferring property to/from an LLC can trigger reassessment in some circumstances — consult a CA real estate attorney.
• Transfer taxes: Documentary transfer tax applies to deed transfers, including transfers to your own LLC. $1.10 per $1,000 of value (plus local additions in some cities).
• No rent control exemption for LLCs: LLC-owned residential properties in rent-controlled jurisdictions (LA, SF, Oakland, etc.) are subject to all rent control ordinances.

FAQ

Is one LLC per property realistic in California?

Only for high-value properties ($500K+ equity) where the $800/year is trivial relative to the asset value. For lower-value properties, grouping makes more financial sense.

Can I avoid the $800 by using an out-of-state LLC?

Not for California property. If the LLC owns CA real property, it is "doing business" in CA and owes the $800.