Question: Neither I nor my IRA custodian is a resident of or is located in Arizona. Can I form an IRA LLC in Arizona that will own and operate a business or own real estate in another state? If so, are there additional costs?
Answer: Yes. An entity (LLC, corporation or limited partnership) formed in one state can register to do business in any other state in the United States. Doing business includes owning real estate in a state other than the state in which the entity was formed. For example, if you are a resident of New York, your custodian is located in Ohio and your IRA LLC will own real estate in California, your IRA could form an Arizona limited liability company and then register it to do business in California. If hired, we will prepare the papers for an additional $200 (plus state filing fees) for each foreign state and file it with any state in which your IRA LLC will own real estate or own and operate a business.
To register an Arizona LLC to do business in California involves preparing and filing a registration form an paying a $70 filing fee. It’s a relatively simple procedure. The problem, however, with doing business in money-starved California is that it has an annual $800 minimum gross receipts tax on LLCs, regardless of where the LLC is formed. An entity formed outside California that does business in California is subject to a $100/day fine for failing to register to do business in the state.
Possible Additional Costs for an Arizona LLC that Does Business in Another State
If your IRA forms an Arizona IRA LLC and then qualifies to do business in another state, the IRA LLC probably will be required by the other state to pay an annual fee and file an annual report. Unlike Arizona, which does not require Arizona LLC’s to file an annual report or pay an annual fee after it is formed, most states do impose an annual fee tax on companies formed in the state and companies formed outside the state that do business in the state. Bottom line is that even if your IRA LLC were to be formed in the state in which it will do business, it would still be subject to the annual fee and report requirements of the state.