Managing real estate in California means dealing with entity compliance—and if you're running multiple LLCs across different properties, these requirements add up fast. Each property LLC, holding company, and management entity carries its own compliance obligations with the California Secretary of State. These entity-level requirements exist entirely separate from real estate licensing governed by the California Department of Real Estate.
California recognizes six primary entity structures for real estate operations, each governed by specific provisions of the California Corporations Code.
LLCs operate under the California Revised Uniform Limited Liability Company Act (RULLCA), codified in California Corporations Code Title 2.6, §§ 17701.01 through 17713.13. Formation requirements appear in § 17702.01.
LLCs give you pass-through taxation and liability protection—making them the dominant structure for property holding entities. California law permits both member-managed and manager-managed structures, with the designation affecting what information becomes public on your Statement of Information.
Corporations follow California Corporations Code Title 1, Division 1, with general provisions in §§ 100-195. Both C-Corporations and S-Corporations operate under identical California formation and governance statutes, with S-Corporation status representing a federal tax election rather than a distinct California entity type.
Real estate holding companies occasionally use corporate structures when planning eventual public offerings or when investors prefer corporate governance frameworks. Corporations avoid the income-based LLC fees but may face higher franchise tax obligations on profitable operations.
California does NOT permit domestic formation of Series LLCs. While foreign Series LLCs formed in other states can register to operate in California, they face significant limitations.
According to the California Franchise Tax Board, California Corporations Code §§ 17710.01 through 17710.10 address Series LLCs exclusively for recognition of foreign Series LLCs—not domestic formation.
The practical implications eliminate any advantage. California treats each series as a separate LLC for tax purposes, requiring the $800 annual franchise tax per series plus income-based fees. More significantly, California courts don't consistently recognize the separateness of individual series for liability purposes, creating substantial uncertainty regarding asset protection.
For California-based real estate portfolios, use multiple individual LLCs for clear liability separation, or holding company structures with a parent LLC owning subsidiary LLCs for each property.
Out-of-state entities must register with the California Secretary of State before "transacting intrastate business" in California. Corporations Code § 191 defines this as "entering into repeated and successive transactions of its business in this state."
Foreign LLC registration requires filing Form LLC-5 with a $70 fee, providing a current certificate of good standing from the home jurisdiction, and designating a California registered agent. Processing times currently average nine business days for online submissions.
California's ongoing compliance framework combines Secretary of State filings with Franchise Tax Board obligations, creating dual reporting requirements that differ by entity type.
LLCs file Statement of Information (Form LLC-12) biennially during a six-month window beginning in the anniversary month of formation, with a $20 filing fee. Corporations file Statement of Information (Form SI-550) annually during a six-month window based on the incorporation month, with a $25 filing fee.
Miss your filing and California hits you with a flat $250 penalty. Beyond the penalty, failure to file triggers administrative suspension by the Secretary of State after a 60-day grace period—halting your ability to conduct business, maintain lawsuits, or complete property transactions. Additionally, failure to pay franchise taxes causes suspension by the Franchise Tax Board, imposing the $800 minimum annual tax liability regardless of entity activity.
Every California LLC and corporation organized or doing business in California owes an $800 annual minimum franchise tax regardless of income, activity, or profitability. California Revenue and Taxation Code § 17942 governs LLC taxation, while § 23153 establishes corporate franchise tax requirements.
Effective January 1, 2025, Assembly Bill 683 authorizes LLCs to present a certification of the LLC's existence and authority—useful for real estate transactions requiring proof of existence such as closings and financing arrangements.
Senate Bill 347, currently pending, proposes reducing the annual minimum franchise tax from $800 to $80 or $200 for a five-year period (2025-2030). If enacted, this would represent a 75-90% reduction in baseline compliance costs for real estate LLCs.
California law requires every LLC and corporation to maintain continuous appointment of an agent for service of process. The agent must be either a California resident individual or a corporation authorized to conduct business in California, maintaining a physical California street address (P.O. boxes aren't acceptable).
California doesn't provide a standalone registered agent change form. Instead, you'll update agent information through your Statement of Information filing (Form LLC-12 for LLCs, SI-550 for corporations), paying the standard $20 (LLCs) or $25 (corporations) filing fee.
When a registered agent resigns or the appointment lapses, the California Secretary of State may declare the entity in default. According to California Corporations Code §§ 8210-8217, this can lead to administrative suspension, entity forfeiture, and enforcement actions by the California Attorney General.
A suspended entity loses the ability to legally operate in California and faces challenges maintaining licenses and permits. Title companies verify entity good standing before closing—an entity showing suspended status can halt transactions, delay refinancings, and create covenant violations with existing lenders.
Should I use an LLC or corporation for California real estate holdings?
LLCs dominate California real estate for pass-through taxation, operating agreement flexibility, and liability protection. The manager-managed structure provides privacy for non-managing members whose identities don't appear on public filings.
Corporations make sense in specific scenarios: real estate businesses planning eventual public offerings, entities seeking venture capital investment, or operations where the 8.84% corporate tax on net income produces lower liability than LLC income-based fees. However, corporations face annual Statement of Information filing (versus biennial for LLCs) and stricter governance requirements.
What activities trigger foreign LLC registration requirements in California?
Foreign registration is required when an out-of-state entity engages in "repeated and successive transactions" in California under Corporations Code § 191. For real estate entities, this includes leasing California property to tenants, collecting rents on an ongoing basis, or actively managing properties.
Passive ownership alone typically doesn't trigger registration. However, the California Franchise Tax Board imposes separate thresholds: you're doing business in California if California real property exceeds $75,707 OR represents 25% or more of total property. Meeting this threshold creates tax obligations including the $800 minimum annual franchise tax, even without Secretary of State registration requirements.
When registration is required, costs include the $70 foreign LLC filing fee, $20 initial Statement of Information fee, $800 annual franchise tax, and $20 biennial Statement of Information filings.
What are the total annual compliance costs for a California real estate LLC?
California real estate LLCs face minimum annual compliance costs of approximately $810-$825 ($800 franchise tax plus biennial Statement of Information fees). However, LLCs with California-source income exceeding $250,000 must pay additional income-based fees of $900-$11,790, bringing total costs to $1,700-$12,590 annually.
Costs multiply across portfolios. A real estate fund with 10 property LLCs each generating $300,000 income pays $17,000 annually in California franchise taxes and fees alone ($1,700 × 10).
What happens if my property LLC falls into administrative suspension?
Administrative suspension occurs when an LLC fails to file required tax returns, pay franchise taxes, or file Statements of Information. According to the California Franchise Tax Board, suspended entities cannot maintain lawsuits in California courts, cannot legally conduct business operations, cannot sell or transfer real property, and face voidable contracts requiring Relief from Contract Voidability applications.
Restoring good standing requires filing all past-due tax returns, paying all back taxes (including $800 for every year of suspension), paying accumulated penalties and interest, filing the current Statement of Information, and submitting Form 3557 LLC (Application for Certificate of Revivor). Minimum cost for a two-year suspension approaches $2,374, and entities suspended for 60 continuous months face permanent administrative termination that cannot be reversed.
Can I maintain anonymity with my California property LLCs?
No. California does not allow anonymous LLC ownership. The biennial Statement of Information (Form LLC-12) requires disclosure of either all managers (in manager-managed LLCs) or all members (in member-managed LLCs), including complete names and physical street addresses.
The only viable privacy protection is structural: form a manager-managed LLC where beneficial owners serve as non-managing members (whose identities remain private) while appointed managers (whose identities are publicly disclosed) handle LLC affairs. This approach is permitted under California Corporations Code § 17704.07 and represents the maximum privacy achievable under California law.
Note that federal Corporate Transparency Act requirements mandate disclosure of beneficial owners holding 25% or more ownership to FinCEN, regardless of your California structure.
Discern provides comprehensive registered agent services and compliance tracking designed for real estate businesses operating in multiple jurisdictions. Our platform centralizes compliance management, monitors filing deadlines, and provides automated alerts so you never miss a critical deadline. Book a demo today to see how Discern can streamline your real estate entity compliance across all states where you operate.
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