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I recently joined a company as an independent contract. The…

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I recently joined a...

I recently joined a company as an independent contract. The company is based in Colorado, but I work remote online in California. We sell online lead generation services to financial advisors. I was looking into potentially registering an LLC in either Wyoming or Nevada since they have no state income tax. I want to confirm I will not have to pay state income tax in California if I go that route?

Submitted: 11 months ago.Category: Finance
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9/17/2017
Financial Professional: emc011075, Tax adviser replied 11 months ago
emc011075
emc011075, Tax adviser
Category: Finance
Satisfied Customers: 3,983
Experience: IRS licensed Enrolled Agent and tax instructor
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HI. My name is ***** ***** I will be happy to help you.

Any income generated in CA is subject to CA taxes, regardless where you register your LLC. Single member LLC is a disregarded entity for tax purposes so the income will be taxed in CA unless you physically work (have a physical presence or office) in Nevada or Wyoming. If you create an Scorp or corporation you will become employee of your own company and receive W2 from your company. The w2 income will be subject to CA income tax unless the job is performed in NV or WY.

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Customer reply replied 11 months ago
If I had a business address in NV or WY would I avoid having to pay CA income tax? If not is there any benefit to creating either an LLC, Scorp, or Corporation in my situation as an independent contractor?
Financial Professional: emc011075, Tax adviser replied 11 months ago

If you work in CA for a company registered in NV or WY, the income is still CA source of income, subject to CA income tax. Unless you move to NV or WY and work there, there's no benefits registering an LLC in NV or WY.

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Customer reply replied 11 months ago
Got it. Is there any benefit from a tax or business standpoint to registering an LLC in California vs getting paid as an individual?
Financial Professional: emc011075, Tax adviser replied 11 months ago

Taxwise no. Single member LLC is same as sole proprietorship for tax purposes. Scorp will give you access to corporate perks like profit sharing or 401K but it will complicate your taxes.

Unless you need a limited liability protection from creditors for some reason than you do not need to create LLC or Scorp as independent contractor.

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Financial Professional: emc011075, Tax adviser replied 11 months ago

Any questions? Is there anything else I can help you with today?

Avoiding paying CA tax while residing in CA is extremely difficult. To be considered non CA source of income the income must be earned outside CA.

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