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Dr. Fiona Chen
Dr. Fiona Chen, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 355
Experience:  Former IRS Revenue Agent
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I have a sole member LLC started in UTAH, live in TN. This

Customer Question

I have a sole member LLC started in UTAH, live in TN. This is a small real estate investing business. I flip homes in TN. I was told to open an LLC in Utah to save $. I've heard that there is a "foreign" tax with this arrangement. I was never told about this when I opened the LLC. Can you tell me a little about it?
JA: The Accountant will know how to help. Is there anything else the Accountant should be aware of?
Customer: no
Submitted: 2 months ago.
Category: Tax
Expert:  Dr. Fiona Chen replied 2 months ago.

Hello! My name is***** to JustAnswer. I'm reviewing your question now, and will post back with your reply momentarily.

Expert:  Dr. Fiona Chen replied 2 months ago.

Dear Customer,

The foreign tax referred to in the Utah LLC income tax return is the foreign country tax and not foreign corporation tax. Would you please tell me more on the statements you heard?

Below quotations and website links are for your references. I will follow up.

Regards,

Fiona

Fiona Chen, MPA, Ph.D., CPA, ABV, CFF, CITP

The Utah LLC is a foreign company in TN. A foreign corporation must obtain a certificate of authority from the Tennessee Secretary of State before it transacts business in Tennessee. Failure to do so will subject the foreign corporation to liability for triple the amount of taxes, fees, and penalties plus interest and other charges that it would have paid had it registered.

A corporation must pay a state's corporate income tax, while LLC members can typically avoid double taxation by paying income tax on the profits earned in the state and receiving a tax credit from the resident state.

Usually state follows what the federal filing is. When you file for the LLC tax return to the federal,

http://www.tn.gov/sos/bus_svc/corpFAQs.htm

http://www.bassberry.com/~/media/Files/Publications/2012/02/Guide_to_Doing_Business_TN.pdf

Expert:  Dr. Fiona Chen replied 2 months ago.

Dear Customer,

I called both the Department of Revenue of State of Utah and State of Tennessee. The answer should be a sort of trustworthy and official. They are answered by technical research unit of Utah and tax specialist of Tennessee.

1) The State of Utah has a sort of "foreign tax" for foreign corporation. That is a non-domestic, foreign corporation, including LLC has to pay a minimum amount of tax in Utah. And that has been referred to as "foreign tax" by some.

2) The State of Tennessee does not have such a minimum tax. A foreign LLC or corporation get to do apportionment. That is, how much is TN income and how much is other state's income. That is it. For a TN corporation of LLC, all income is included as TN income.

TN does require all businesses report Franchise and Exercise tax. There are two sections which are the taxes on net worth and net income. TN also requires filing of Business Tax which is based on gross income. The State of Tennessee, Secretary of the State does charge a fee for foreign corporation registration.

Please feel free to follow up.

Regards,

Fiona

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