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socrateaser
socrateaser, Lawyer
Category: Tax
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Experience:  Retired (mostly)
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We are a Virginia based LLC that provides website development

Resolved Question:

We are a Virginia based LLC that provides website development and online marketing services to clients across the USA and we have a few clients in other countries.

We are an LLC partnership registered in Virginia, owned by myself and my brother. Most of our workers are 1099-contractors and everyone works from their own home. My brother is in Virginia and I am in Florida.

We are planning to hire an employee (W-4) and have Nexus questions related to them and myself.

Keep in mind that the services we provide are digital and work is done from the worker's home, not on-site at the client's location or at a company location. Our company has no actual physical office location.

1) Where should my income tax liability be? Virginia or Florida? We are a Virginia company, but I live and work from my home office in Florida.

2) If we were to hire an employee in Florida, where would their tax liability be, and which state's employment laws and taxes would we follow? Virginia or Florida? We are a Virginia company, but the employee would live and work from their home in Florida.

Thanks,
Adam
Submitted: 6 years ago.
Category: Tax
Expert:  socrateaser replied 6 years ago.
1) Where should my income tax liability be? Virginia or Florida? We are a Virginia company, but I live and work from my home office in Florida.

A: An LLC does not pay taxes. The owners pay taxes on the distributions of profits received and reported through their K-1 Information Return, and they are liable where they perform their services for the LLC. If you are in Florida, then your liability is in Florida.

If you are receiving a 1099, while simultaneously being an owner of the LLC, then that 1099 is incorrect, because you cannot legally be an independent contractor to an LLC in which you are an owner -- i.e., a partner cannot be independent while working for the partnership.

2) If we were to hire an employee in Florida, where would their tax liability be, and which state's employment laws and taxes would we follow?

A: An employee is subject to the employment laws where the personal services are performed -- as is the employer, because by employing the person in a different jurisdiction, the employer submits to that jurisdiction for the purposes of doing business. Here again, the answer is Florida.

Hope this helps and happy new year.

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