Out Of State LLC Tax Question, Help Please
Hi,
I live in CA and I want to form an 1 person LLC in oregon to avoid that $800 fees. This would be for a side/hobby business. I have a regular job during the day time.
If I earn in income from this business, do I have to pay income taxes on this business for both states, or just oregon or just CA.
I want to open a web presence and sell things based out of Oregon so to not have to deal with sales taxes. I will not have any physical inventory in either state (just drop ship or something similar).
The income is taxed by the state where the property is located. Their should not be any tax at the LLC level (maybe the individual member level) from the state of organization unless they have a minimum tax or fee.
The requirement to file the CA LLC tax return (and pay the minimum tax) does not hinge on whether the LLC is organized in CA or not, it depends on whether the LLC is doing business in CA.
I live in CA, and have a LLC in another state where I own rentals. Because no income from the rentals is CA source income, I do not have a CA business, and thus no $800 franchise fee. I do have to file a state return for the state where the properties are located. But CA has a credit relationship established with the other state, so in effect I pay no taxes to that other state.
I do remember though when I was trying to figure this all out that I read something about internet based businesses in CA. Because you are managing it here in CA, they may consider it as a california based business.
Thanks for the reply, I did the searches for the key words and this board was the only place with the right LLC topics. I will try that other board that you suggested.
California requires you to register and file as a foreign entity with the California Secretary of State if you are "doing business" in California. If you manage the business in California, conduct meetings, conduct sales efforts, etc., you run the risk that you would be classified as "doing business" in California an required to file with California.
[addsig]
May I politely suggest you review all the posts in the LAW and Legal Forum regarding LLCs, perticullarly NV, DE, and WY LLCs. This issue has been well covered before.
Also, review the post "Nevada Corps and Tax Strategies" in this forum, I posted some information here that may help you understand the issues.[ Edited by Mantis on Date 04/08/2005 ]
and what consitutes doing business.
If I call from CA to my property manger to rent the place in OR, is that "doing business"?
Depends upon how you are structuring the sale and to whom you are selling.
Is the buyer an immediate family member (grandparent, parent, sibling, child, or grandchild)? If so, then the difference between your cost basis and the FMV of the property is your taxable sale profit.
The difference between your sale price and the FMV of the property is your gift of equity. If the total gifts to this individual is no greater than $11K during the year, then your gift is tax free. You would report any annual gift amounts to an individual that exceed $11K on a gift Tax Return that you would file along with your annual 1040. Whether an actual gift tax is paid depends upon whether the toal amount of taxable gifts in your lifetime exceeds $1.5 million.
Is this sale at FMV? How much is your brother paying for the property?
My brother is paying $78,950 for the property.
Am I missing something? If the FMV is $78k and your brother is paying $78k, there is no gift - just a straight sale.
Thank you very much. My return next year will be very interesting.