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Lane
Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 9188
Experience:  Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
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If Business 1 located in State A conducts work in State A and

Resolved Question:

If Business 1 located in State A conducts work in State A and State A has more taxes than State B. But Business B is located in State B and does "marketing" which takes almost all of Business A profit. Both business owned by same person. is this illegal?
Submitted: 2 years ago.
Category: Finance
Expert:  Lane replied 2 years ago.

Lane :

Sure, you just described a fairly typical situation... at least not Atypical Now, how you handle the taxes is a different story ... are both of the companies Pass-through entities whose income and/or losses flow through to the owners tax return? (sole proprietorship, s_corp, LLC or partnership)

Lane :

I still don't see you coming into the chat so I'll try to answer generally:

Customer:

sorry, phone call

Lane :

If both entities are owned by you, and they are passthroughs (mentioned above) then when you do the informational 1120-s for the S-Corp or the informational 1065 for the partnership OR the schedule C for a single member LLC or Sole Pr, then everything flows to your personal tax return anyway

Lane :

sOK I'm here

Customer:

Well State A charges corp taxes, State B doesnt,

Lane :

Ahhh

Customer:

So there still is a saving of 9%. but is there a better way..

Lane :

then that will paid on the state corp return of state A

Lane :

Please don't shoot the messenger here, state corp taxes are paid on a state corp return forr that business

Customer:

If Business A ends up making a profit of 5k. than the 5k pays 8.8% taxes for Corp and than the remainder goes to the personal side....

Customer:

yes, but in NY, theres a state and city corp tax

Customer:

sorry for the mix up. so business A would be saving on the city

Customer:

So since Business B would be the byusiness with the income, is it better for it to be a pass through

Lane :

ok, right, but again when you are talking about state and/or city taxes they are taxed to the entity, specifically

Customer:

Yes, so lowering the profit of Business A that pays a 9% city tax by paying Business B in a diff state. would be a savings.

Lane :

you bet

Customer:

and legal.

Lane :

CA keeps people from doing that by requiring a minimum tax

Lane :

yes

Lane :

completely, profit is profit

Customer:

perfect. now its about finding which state has the lowest state tax on the personal side.

Customer:

thanks for your help

Lane :

sounds like you have your arms around it

Lane :

You're welcome

Lane, JD, CFP, MBA, CRPS
Category: Finance
Satisfied Customers: 9188
Experience: Law Degree, specialization in Tax Law and Corporate Law, CFP and MBA, Providing Financial & Tax advice since 1986
Lane and other Finance Specialists are ready to help you
Expert:  Lane replied 2 years ago.


Thanks for the rating Guy.

Let me know if I can help again,

Lane