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Lev
Lev, Tax Advisor
Category: Tax
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Experience:  Taxes, Immigration, Labor Relations
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I live in South Carolina. I am moving to Florida, I am an Engineering

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I live in South Carolina. I am moving to Florida, I am an Engineering Consultant.
I am concerned about the business tax when I form a new LLC in Florida. Non of my work is in the state of Florida. All of my work is done on site in South Dakota which consumes about 50% of my time.
Would I be better off forming a LLC in South Dakota in order to pay lower taxes on my business?
I expect to earn about 100k in 2013. Also I collect SS because I am 67 Years old.
Also I live on a boat and claim some of the expenses of living on the boat
(phone, internet) to my business.
Not sure what to do here...............

LEV :

Hi and welcome to Just Answer!
The issue is that a single member LLC is a disregarded entity (unless you specifically choose to treat the LLC as a corporation) - and does pay income taxes. Instead - all income is passed to the owner.
So all your business income will be taxed for you personally.
Correspondingly - if you do work in South Dakota - the compensation is taxable for that state regardless if you are a resident or nonresident - because that is income from South Dakota sources.

LEV :

Generally - you do not need an LLC and may simply act as a solo proprietorship - but you may register the LLC in ANY state.
The issue with forming a LLC in South Dakota might be that South Dakota taxing authorities will treat all income from South Dakota sources - not only 50% as you might think - and you will need to proof otherwise.
On the other hand - if you register the LLC in Florida - it would be considered as a foreign LLC in South Dakota - and must be registered in this state.

LEV :

See Foreign Limited Liability Companies on this page - http://sdsos.gov/content/viewcontent.aspx?cat=corporations&pg=/corporations/corporations_forms.shtm
For federal tax purposes - that would not matter if you have a LLC and where it it is registered.

Customer:

If I understand you correctly, I should register my single member LLC in Florida .

Customer:

BTY South Dakota is in the USA

LEV :

Generally - you do not need an LLC and may simply run business activities as a solo proprietorship - but if you still want teh LLC for any reason - it would be better to register in the state where you live - in your case in Florida.
A foreign LLC - means - registered outside the state - not in the foreign country.
The LLC registered in Florida is treated as a foreign LLC in South Dakota - and must be registered in order to conduct business within that state.

LEV :

Similarly Florida requires that all foreign LLC to be registered - http://form.sunbiz.org/pdf/cr2e027.pdf


The foreign limited liability company must submit an original certificate of existence, no more than 90 days old, duly authenticated by the official having custody of records in the jurisdiction under the law of which it is organized.

Lev and 4 other Tax Specialists are ready to help you
For federal tax purposes - you will report all business income and expenses - on the schedule C -http://www.irs.gov/pub/irs-pdf/f1040sc.pdf
The net income (after deductions)will be reported on the form 1040 line 12 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
If the business has net income over $400, it may be required to file Schedule SE, Self-Employment Tax and net income is likely self-employment income and 15.3% self-employment tax would be required.
Self-employment taxes from schedule SE will go to the form 1040 line 56 - http://www.irs.gov/pub/irs-pdf/f1040.pdf
Also - you will deduct half of self-employment taxes on the line 27.
Generally - that all you needs for income tax purposes . Please review all possible deductions - that might help to reduce income tax liability.