I will soon be inheriting some mineral rights and they will be transferred to an LLC I recently setup this year. I’ve ran into some challenges and am looking for advice.
The interests and the operators (there are 40) are all in Texas and I live in Ca. I setup the LLC in Texas to avoid state income tax and the extra IRS paperwork. But I’m having a difficult time finding a virtual office address with dependable mail forwarding for the LLC.
I have been cautioned by the estate that I must have a dependable mail forwarding service as I will be receiving a high volume of mail and time sensitive documents. But most of these office/address providers seem sketchy based on the reviews. And I personally had a nightmare experience for the last 6 months with one of the most popular names in the industry. I could not receive mail for 6 months! I’ve just cancelled my contract and am looking for a new address provider now.
So, I’m wondering if anybody else has been in a similar situation and can offer some advice. I’ve done so much research, I can’t believe how difficult this has become. I just need a virtual address service with dependable mail forwarding, an address which can also be used to open a business bank account.
Or maybe there is another solution I haven’t thought of? Any advice would be appreciated.
You will likely need a registered service agent with a physical address to be compliant with LLC laws in Texas. These companies may offer mail forwarding services but that can get pricy. Visit with a Texas attorney about filing in the various counties the best address. I suspect that listing your CA address would be fine for county land record filings and for property taxes. Again, pay a Texas attorney for that advice.
This post is not legal, tax or investment advice. Reading or responding to this post does not create an attorney/client relationship. Not licensed in Texas.
You should also consult your CPA about issues surrounding state income tax. For an LLC, you have to elect whether to be treated as a partnership or corporate entity, which has personal income tax implications. A single-member LLC is generally treated as a pass-through entity and the income is directly reported on your individual federal tax return and I would expect that to flow through to your CA tax return. The LLC will also need to file annual Texas Franchise Tax report which your CPA can do.
Thanks for the replies. I should have made my post clearer.
I registered a Texas LLC (as opposed to Ca) because it’s easier, there are less annual fees and paperwork.
I expatriated from the United States, Ca state, over 20 years ago and I file Ca state taxes but I have no liability. So, I don’t pay state tax.
I have a Texas registered agent. And I’ve changed my LLC business address twice already. What I’m really seeking is advice on addresses and mail forwarding. It seems (based on my research) that most of the big companies that offer virtual business addresses are shady and not dependable for mail forwarding. And I can attest to that based on my experience the last 6 months.
Currently, I’m looking into virtual office/business address solutions at co-working spaces. I’m curious what others do with their LLCs here. Do they use their home address as their principal place of business?
Your situation of being outside of the U.S. is unique, as other owners are U.S. based and have accessible mailing addresses, whether an office, home or PO box. Your registered agent, CPA or attorney might be able to forward mail. You can set up a lock box arrangement with your bank, although many of the banks now prefer to scan the mail rather than forward original documents. You could contract directly with a responsible individual. All of these alternatives will be more expensive. However, you need to keep in mind that mineral management and related recordkeeeping with 40 different payors is time consuming and needs to be handled timely, including leasing, division orders, ad valorem taxes (annual appraisal reviews within 30 days in the spring and then payments in the fall), royalty payment reviews, etc. Perhaps you should consider hiring a formal mineral management company - whether run by an individual or by a bank.
Your initial post claims you live in CA and are trying to avoid CA state income taxes. I think it would be an easier decision tree if you know or could be told the approximate income (maybe you already know) from the properties to make a more informed decision on how much you can afford to spend on the LLC expenses. Then you can determine if the tax advantages are worth the time and capital. I live in Oklahoma and OK does not tax my TX income. That said, Texas charges ad valorem and other county/local taxes based on reserves of each well regardless of LLC or state of residence.
You’ve reminded me that I have a lot to learn on this journey and many things to consider going forward.
I’ve determined that an LLC is the best for my use case but I still haven’t managed to find a dependable address and mail forwarding solution.
Hiring a formal mineral management company is definitely something to consider for the future. However, I’m really interested in learning and eventually I’d like to manage on my own.
If you are interest in learning, then you might consider joining the National Association of Mineral Owners. www-naro-us.org. They have a Texas Chapter. NARO is all about educating the mineral owner! They have an introductory one year membership.
Right on cue I just received three tax notices for my properties in Wheeler and Hemphill Counties Texas for around $9000. They seem to trickle in through the end of November from various taxing agencies. Like every state, they collect revenue from multiple sources and state income tax is just one source. These are county focused charges to fund schools, hospitals and all of the usual local suspects. Fortunately, these require no management skills except to write a check or equivalent!