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Merlo, Accountant
Category: Tax
Satisfied Customers: 9783
Experience:  25+ years tax consulting. Specializing in returns for US citizens living abroad
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If i form a LLC in Oregon and non of the members are oregon

Resolved Question:

If i form a LLC in Oregon and non of the members are oregon reisidents, do the members have to pay state income tax in oregon or is it based upon where they live
Submitted: 8 years ago.
Category: Tax
Expert:  Merlo replied 8 years ago.
Hello hubbell,

State tax is based on both where you live and where you have earned income from.

If your LLC has any earned income from sources within the state of Oregon, then Oregon state tax would be due on that portion of your earnings. But earnings not from an Oregon source would not be subject to Oregon tax if they do not reside in that state.

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Thank you hubbells.

Merlo and 3 other Tax Specialists are ready to help you
Customer: replied 8 years ago.
Both members will work outside of oregon but the profits generated for the llc will be in oregon.
Expert:  Merlo replied 8 years ago.
Can you please tell me more specifically the type of business and the income that will be generated in Oregon?

Customer: replied 8 years ago.
We have a construction company that rehabs homes for investors. One of our investors is forming a company with us and he lives in virginia and I have a office in washington that i work out of. Since we are setting up an llc I need to know if there is an advantage to us setting up in a state like Delaware(no state income tax). Once we do that we could set as a foreign llc in oregon. since llc are taxed on individual level will myself and my investor have to pay oregon income tax of 8%. Neither of us actually work in oregon as my office is in washington and his office is in viginia.
Expert:  Merlo replied 8 years ago.
Hello again hubbells,

First, there is no advantage to you setting up your LLC in Delaware or any other state. It is true that Delaware does not impose state tax on corporations, but an LLC does not pay tax at the corporate level anyway. The only type of corporation this applies to is a C Corporation. A multi member LLC is taxed as a partnership. The Partnership itself will file a federal tax return, but no taxes are due at the LLC level. All of the income is passed through to the partners and reported on their respective personal returns.

Even though you and your partner will not actually live in Oregon or physically work in Oregon, your business has profits generated from inside of Oregon, and those profits would be subject to Oregon state tax. That will be true regardless of what state you choose to set up your LLC. However, at the same time you will report this income to the state where you reside, and your resident state will allow you a credit for the tax already paid to Oregon, thereby eliminating or reducing double taxation at the state level.

If this was helpful please press the Accept button. Positive feedback is also appreciated.

Thank you hubbells.