Should I Form My LLC in California or Some Other State if My Rental Property is in California?

For better asset protection, states such as Delaware, Nevada and Wyoming generally have better LLC (Limited Liability Company) statutes than California. The short answer to the question is yes. To have greater protection from the entity being pierced in the event of a lawsuit against the property (especially if the LLC is a single member LLC) it is advisable to form the LLC in Nevada, Wyoming or Delaware.

The downside is that you are most likely going to have to register the LLC in California as a foreign LLC and pay the $800 annual California State Franchise Board fee. The upside is far greater protection and the annual costs to the State of Nevada or Wyoming are far less than in California. In my legal opinion, having greater liability protection is worth a few hundred dollars extra a year.