I’m in Iowa and working on forming an LLC for working interests I have in Oklahoma and Texas. Are their special requirements I need to take into consideration when I have an LLC registered in one state with the property in another state? I am not sure if I need to register in both Oklahoma and Texas somehow, too, or what needs done or how to begin that step. Any advice would be appreciated. Thank you
What benefits do you believe an LLC would provide? Royalty owners rarely need to worry about liability. An LLC may add an unneeded layer of complexity over a Trust. You would also need to comply with Corporate Transiency Act which is administered by the Financial Crimes unit of the Treasury. Yikes.
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@SSS, generally speaking LLCs are required to register in the states they are doing business in and are required to maintain an agent in each state along with complying with other annual certificate and reporting requirements particular to each state. The Secretary of State websites for each state often have the references needed to find the rules in each state.
I have non operator working interest in my and my husband’s name. I thought that an LLC would protect our other assets from any liability claim. I see folks saying the non operator working interest needs liability insurance and I am checking with the operator to see if we have that through them. If we don’t, I don’t even know if I can get that for my working interest. So that’s why I was thinking the LLC. Am I misinterpreting the need for an LLC and liability insurance for what I have?
The LLC will provide a layer of protection. Generally, non-op WI are governed by JOA and pay their share of expenses, including insurance. Are you receiving detailed JIB (joint interest billing) statements which list the expenses? I have not heard of non-op WI getting separate well insurance. Of course it is always a good idea to have a personal umbrella policy. Your business attorney and a CPA experienced in oil and taxation can provide best advice.
Neither side has the JOA so I’m not sure what happens next for determining that. I do receive the JIB statements and those have a section for Admin, which is a chunk, but it is not broken down. It may be under there. I am trying to get confirmation. Seems like I’m the first person to ask for this information, which seems really odd. I don’t want to make an assumption.
This comes to a question of economics. If the LLC is properly formed and operated, then it will provide a layer of personal liability protection. There is insurance to manage various risk exposures, but the cost can be high and limited; therefore, you have to assess the value of the properties to the insurance cost. The insurance of the operator can potentially protect your interest as it relates to their operations, but you would need to review the policy. If you have concerns, you should get an experienced professional in these matters to provide you with options. A personal umbrella should not offer protection to the W.I. since it is in an LLC. The LLC is considered a separate entity as long as properly formed and maintained. I want to stress, this is not the venue for specific advice on this issue since there are multiple variables and complexities.