Taxpayers struggle with state LLC regulations
16 posts across 7 communities in the last 60 days; 56% from r/tax.
“check with your state board that as a licensed professional you can be an LLC. in CA you can't.”
“When you say you incorporated, in which state did you incorporate? If you aren’t incorporated in CA you should incorporate as an out of state corp. You absolutely have to pay CA tax on CA source income only. Federally you might be able to get the foreign earned income exclusion…”
“I would not do this. If CA considers someone to be a resident for tax purposes, filing 2 years of nonresident CA tax returns showing zero CA source income will not help. Instead, it might cause CA to wonder what the taxpayer is trying to hide.”
Several posts reveal confusion and difficulty navigating the legal requirements for establishing a Limited Liability Company (LLC), specifically mentioning restrictions in California. This points to a need for clearer guidance on business formation compliance.
SOURCES (29)
“When you say you incorporated, in which state did you incorporate? If you aren’t incorporated in CA you should incorporate as an out of state corp. You absolutely have to pay CA tax on CA source income only. Federally you might be able to get…”
“I would not do this. If CA considers someone to be a resident for tax purposes, filing 2 years of nonresident CA tax returns showing zero CA source income will not help. Instead, it might cause CA to wonder what the taxpayer is trying to hide.”
“Why would owning a house in California create an income tax liability? Are they saying that wages you earned elsewhere in 2021 are taxable in CA because they thought you lived there then?”
“If you want to get your personal address out of the LLC, a lot of states will let you update that portion to something like a virtual address, and then we'd stay in the registered agent field. From there, you could use that same virtual address in the email footer if you get into newsletter stuff, since CAN-SPAM just needs a mailing address, and it doesn't have to specifically be your home. Banks will usually accept that same virtual business address so long as it's a real street add”
“Hello r/tax . Solo Tax practitioner, first year completely virtual, Any sure way of leaving off home address? I've read using virtual mailboxes, but principal address where business operations are taking place, this being my house, would have to placed? Any way to get around this in California? submitted by /u/otheloR [link] [comments]”
“Yeah I’ve noticed a lot of people jump straight to form another LLC without really looking at foreign qualification first. That distinction was interesting.”
“What caught me off guard was not registering the llc and it was everything that followed. A remote hire, stored inventory or enough revenue could create different state obligations without us opening an office. I started maintaining a state by state activity record”
“There are probably differences in the annual fees and depending on the industry there may be licensing needs as well but there aren't any income tax differences. I've seen more DE LLCs than any other type and don't think anyone involved besides perhaps a junior attorney have ever stepped foot in DE. The easiest thing to do is probably to just form the NJ LLC and do whatever local registrations you need there so you don't have to update anything later or do an out of state registr”
“Hi all! I am currently moving states (from NY to NJ) my residency is still currently ny as I still work to move. I hired a lawyer to help form an PLLC in NY. She has been unhelpful with deciphering where to establish this and has already taken my money... I have been trying to find a CPA who has worked with others in my profession before but waiting to hear back. Would it be advisable to form my LLC in NJ with my move? Or try to just establish it in NY while it is still my residency? Any advice”
“I just moved to New York (not the City) from Utah and am trying to figure out the best way to move my single member, no employee, LLC. I'm a carpenter and sub contractor. We still have ties to Utah and it is entirely possible that I continue to do some business and Utah in the future and I plan to maintain my contractors license there at least for the time being. I need to change the address my business is registered to and would prefer to move it to my new address in NY submitted by &”
Yeah the registration part seems to be the biggest headache.
“No sure about CA, but in my state (MO) both foreign and domestic LLCs can use a registered agent that is not the owner to maintain privacy.”
“Ah. Well maybe you do lol. Have you looked into it? Is your business income remote such that it could be based in PR and sheltered from state income taxes? My income is ineligible due to state laws, so while passive (royalties) it didn't make sense. IIRC (and it's been a few years) it basically needs to be a professional services business to qualify. I could be wrong though... it's been 10 years probably since I looked into it and a lot changes. That said, if I was wroth $100M, I pro”
“You generally pay income taxes where you live not where the company is based. Some states require all businesses employing people living there to register with the state, which most are unwilling to do for a singular employee. There are some ways around this from what I have learned doing impatriate/expatriate returns… however, if you get caught by the employer, then you will be fired; if you get caught by one or more of the government agencies, then you could receive tax assessments, interest,”
“The surprise is usually not forming the LLC. It is foreign qualification. If you have a presence in another state, an office, an employee, regular in-person work, or sometimes sourced sales over that state's economic nexus threshold, you register as a foreign LLC, appoint a registered agent, and file that state's annual report and any franchise or privilege tax. Sales tax nexus and income tax nexus are separate from the entity filing. A state can want sales tax collected long before it w”
“what kind of business are you running? selling physical items, or doing physical work in those states? if its knowledge or consulting work then I'm sure you have a remote component, then theres an argument based on how much time you're physically in those other states as to whether you need to register in them or not?. I'm not a lawyer but when I used to consult for big 4 companies, it was mostly decided by how many nights we were away from home in those states”
“I wouldn't use Stripe Atlas. That company will create your LLC in Delaware, which isn't a good choice for non-U.S. residents. Wyoming would be a better choice for you. A U.S. LLC defaults to certain tax treatments. If there is more than one owner of the LLC, then the default tax treatment is that of a partnership. Partnerships are "flow-through entities" meaning that the income is taxable to you in Germany. A U.S. Form 1065 must be filed each year as well. If there is only one”
“That’s why you need a trust to own your LLC. And you shouldn’t register the LLC in a state that publicly shows your info. Attorneys can be the registered agent.”
“the losing good standing thing is no joke tbh, that can snowball fast if you dont catch it”
“In a CA CPA. Taxpayers who live in CA love to set up their LLC in WY, then conduct all their business in CA - meaning they are subject to the same filing requirements as if they had organized in CA, but also have to pay WY’s annual fee.”
“one thing that gets overlooked is local business licensing. you can handle llc registration correctly and still need separate permits, tax accounts or registration based on what you actually do in that state.”
“The thing that got us wasn't the registration, it was that the trigger for owing anything is almost never the same as where you think you operate. Payroll in a state, a remote hire, an office, even hitting a sales threshold can each create nexus on their own, and sales tax nexus and income tax nexus are separate tests. What actually helped was one sheet listing every state with a reason we touched it, employee, revenue, or property, then handing that to an accountant instead of asking genera”
“The thing that caught me off guard was how easy it is to think registering the LLC is the hard part. The ongoing state filings, taxes, and deadlines are where things get messy.”
“I keep seeing that operating an LLC in multiple states can mean dealing with a whole new set of registration and compliance requirements. What caught you off guard the most when expanding into another state? Was it foreign registration, taxes, annual filings or something else? Trying to understand the stuff that tends to get overlooked. submitted by /u/RegularOk1820 [link] [comments]”