Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I have a delaware LLC with S-Corp elections, and do business

as a consultant all over...
I have a delaware LLC with S-Corp elections, and do business as a consultant all over the US. I am a W2 employee of my business, and officially a resident of the state of New Mexico. I pay NM state taxes for both personal and business income. I just found out on Monday that I have to move to California in the next few months, and I want to understand the tax implications of this. If I am registered in Delaware, but a paid employee residing in CA - am I better off losing the S corp status? Should I close the mess that I've made and start over? I'm thoroughly confused at this point, and reading tax law online is making me cross-eyed. Please help!
Show More
Show Less
Ask Your Own Tax Question
Answered in 8 minutes by:
1/3/2009
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,151
Experience: Taxes, Immigration, Labor Relations
Verified

As your income is taxable in your state - currently in NM and in future - in CA - there is no any tax advantages to have LLC registered in Delaware.

 

It would be less overhead to have LLC registered in the state where you live.

Here is information about CA LLC registration - http://www.sos.ca.gov/business/llc/llc_faq.htm

 

Please let me know if you need any additional information.

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,151
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 8 years ago

Would it be better to close the current set up and start over with a new Fed tax id? Or would I be able to just move the whole thing over to CA and sever the registration in Delaware and NM?

 

Thanks!

Delaware LLC doesn't pay income tax in Delaware if it doesn't do business in the state - your only overhead are (1)requirements to file tax return and (2)the minimum tax due $250.

If you feel comfortable - you may leave that as is...

 

If you decide to register LLC in CA - you do not need new tax ID - you may keep all books as well. Please remember - that there is the $800 minimum tax in CA for any LLC that does business in CA.

 

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,151
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 8 years ago

Ok...so, let me make this even more complicated...technically, I'm not doing billing in CA. My billing is all done out of the country. I consult for a foreign company, that has US customers, and they pay that company, who I then invoice for work done on a monthly basis.

 

In my mind, that would mean I am an employee of a Delaware, LLC with SCorp elections, who is residing and collecting a salary while in CA. So, would I not register the LLC in CA, but keep it in Delaware and pay taxes on the income that I get paid on the W-2?

 

But if I'm an SCorp, that's passthrough taxation...so do I have a benefit at all by trying to keep the S Corp rating, or should it be more of a C Corp? And there's big benefit there to be in Delaware, correct?

If the LLC (or any other business entity) - regardless of its location - has an employee in CA - that means - the LLC is doing business in CA - and according to CA law - should be registered in that state, collect and remit employment taxes, registered with CA Department of Industrial Relations - collect and remit FUTA taxes, etc.

If the LLC do not do these - it will violate CA laws.

 

In my mind, that would mean I am an employee of a Delaware, LLC with SCorp elections, who is residing and collecting a salary while in CA. So, would I not register the LLC in CA, but keep it in Delaware and pay taxes on the income that I get paid on the W-2?

If your workplace is in Delaware - same is true for Delaware registration - and the Delaware LLC would be required to pay Delaware taxes - because it would do business in that state - and you would have income from Delaware sources and therefore would be required to file non-resident Delaware income tax return and will owe some taxes.

 

Before moving forward - you need to determine - regardless of registration - where the LLC is doing business - having employees in a specific state - means doing business in that state.

 

S-corporation vs C-corporation:

C-corporation is taxable entity and pay its own income taxes - in some circumstances it is beneficial, but if any dividends distributed to shareholders by C-corporation are subject of double taxation - on corporate and on individual level - so if you plan to distribute income to yourself - there will not be any benefits from tax prospective...

However if you want to keep money in the corporation, purchase some business properties - you may have some tax savings.

 

Ask Your Own Tax Question
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,151
30,151 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

  • Ask an ExpertExperts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional AnswerVia email, text message, or notification as you wait on our site. Ask follow up questions if you need to.
  • 100% Satisfaction GuaranteeRate the answer you receive.

JustAnswer in the News:

Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.

What Customers are Saying:

I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response...

T.G.WMatteson, IL

I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, MN

Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with.

OrvilleHesperia, California

Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help.

Mary C.Freshfield, Liverpool, UK

This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!!

AlexLos Angeles, CA

Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
This is a question on a UK resident's personal income tax on
This is a question on a UK resident's personal income tax on lump withdrawals of funds in a Canadian RRSP using an example with funds expressed in $CAN. Value of lump sum payment from the RRSP is $100… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
If someone has obtained my tax return and w-2 without my
Good morning. If someone has obtained my tax return and w-2 without my permission as well as showing it to other people, is that legal? … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
How much is UK Corporation Tax on foreign dividends received
Hi Tony,How much is UK Corporation Tax on foreign dividends received from Honk Kong subsidiary?The recipient of such dividends is UK based Limited company. Are these foreign dividends exempt for a "sm… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
I live in Texas (no State Income Tax) and got offered a part
I live in Texas (no State Income Tax) and got offered a part time telecommute job in the State of California. They are going to take out State Income Tax on my California paycheck. Will i taxed in Cal… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
Are you familiar with income tax laws on business and
Are you familiar with income tax laws on business and personal returns? … read more
Lev
Lev
Tax Advisor
30,151 satisfied customers
A foreign individual is a member of a US LLC. Are there any
A foreign individual is a member of a US LLC. Are there any extra requirements for filing when it comes to the partnership return?… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,483 satisfied customers
Dose mean can not deduct state income taxes only or dose it
dose mean can not deduct state income taxes only or dose it includes property taxes too … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can my LLC with US and Foreign members be a shareholder in
Can my LLC with US and Foreign members be a shareholder in an S Corporation? The K-1 would go to the LLC.… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Is real estate income taxed only in the state they are
Hi. Is real estate income taxed only in the state they are generated in? For example, if someone owned investment real estate in Texas that has a 0% state income tax and lives in Pennsylvania, would t… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I (US person) own 50% in a foreign partnership (real estate
I (US person) own 50% in a foreign partnership (real estate partnership under civil law (GbR) in Germany), the other 50% are held by a none US person. - I have rental income from the foreign partnersh… read more
taxmanrog
taxmanrog
Master\u0027s Degree
699 satisfied customers
Multi State Taxation 1. Taxpayer is incorporated in one
Multi State Taxation1. Taxpayer is incorporated in one State and also has certificate of authority to work in another state. However, entity has employees and processes and files payroll tax return in… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
This is a question about state income taxes between IL and
This is a question about state income taxes between IL and WI. Earlier this year, my wife and I were living in WI, I worked for a WI employer and she worked for an IL employer. We filed state taxes in… read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
736 satisfied customers
Same question on the taxation of interest and dividends (on
Same question on the taxation of interest and dividends (on mutual funds) earned inside a disclaimed portion trust ... disclaimer trust . The original owner of a trust passed and the spouse declined a… read more
Lev
Lev
Tax Advisor
30,151 satisfied customers
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2
FEDERAL INCOME TAX: A SINGLE WOMAN RECEIVES A 2016 FORM W-2 FROM HER EMPLOYER WITH A TYPO IN THE SOCIAL SECURITY NUMBER. TO DATE THE EMPLOYER HAS NOT PROVIDED A "CORRECTED" FORM W-2. IS THERE AN IRS "… read more
Mark Taylor
Mark Taylor
Certified Public Accountant
Masters
2,220 satisfied customers
International attorney that can help with double Taxation
International attorney that can help with double Taxation treaty between US and Germany. A US Green card holder in the year 2014 worked in Germany more than 183 days as a doctor, but less than 330 day… read more
taxmanrog
taxmanrog
Master\u0027s Degree
699 satisfied customers
Does Colorado state law follow IRC Section 1.761-2()(2)
Does Colorado state law follow IRC Section 1.761-2(b)(2) election to be excluded from Subchaper K for an LLC holding one investment property? … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Can franking credit on an Australian income tax return be
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Is a 1040 US Individual Income Tax Return federal income
Hi Is a 1040 US Individual Income Tax Return federal income taxes owed to the US government? Or is it FICA? I received a letter owing some back taxes and since I'm a priest with a weird set of tax exc… read more
ABC Accounting Group
ABC Accounting Group
Bachelor\u0027s Degree
682 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x