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Lev, Tax Advisor
Category: Tax
Satisfied Customers: 29795
Experience:  Taxes, Immigration, Labor Relations
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Was just checking some of your responses and may contact you

Customer Question

was just checking some of your responses and may contact you soon thanks , Dave
Do you do consultations regarding sole proprietorship vs incorporation.
Another question where do you base you taxes on you residence or work location.
Submitted: 1 year ago.
Category: Tax
Expert:  Lev replied 1 year ago.

Hi ,

are looking for a specific expect or I may help you?

Customer: replied 1 year ago.

Possible to work in in all three western states washington, nevada and California. most residency is in nevada and washington. highest percentage of business could be california....but they have state taxes, which is why we are looking to incoorporate into something like "Martinson Holdings" and run business from that structure. paying workers where appropriate and where work is done. sorry for ramble ....tired.

Expert:  Lev replied 1 year ago.

state income tax liability is based on both - the source of income AND residency.
If you have an income from sources within any specific state (which have income tax) - your income would be taxable for that state regardless of your residency.
However - when you are a resident of such state - ALL your income is taxable regardless of its source.

Expert:  Lev replied 1 year ago.

Just to illustrate...
If you are a resident of Washington state and have income from California sources - that income is subject to CA income tax regardless of your residency.
As a nonresident of California you would be filing income tax return using a nonresident tax form and will be taxed ONLY on income from sources within California.

However if you were a resident of California and have income from Washington sources - you will file California tax return using resident tax form. All your worldwide income will be taxable for California - including that income from Washington sources.

Expert:  Lev replied 1 year ago.

If you want to separate business from yourself - these might be two step procedure...

Briefly...First a separate business entity is registered with your state. That may be either an LLC or a corporation.

Then - you may elect the tax treatment for your entity. That would be either a partnership or C-corporation or S-corporation.

For S-corporation there would be additional requirements - only physical persons may be shareholders and only one class of stock is allowed.

Regarding taxation...

Partnership files its tax return but do not pay income tax - instead all tax liability passed to partners.

C-corporation is a separate legal and taxing entity - it files the tax return and pays corporate income tax - shareholders may receive dividends out from after tax income and will be individually taxed on these dividends.

As you will be an employee for that C-corporation - you will receive wages as a compensation for your serviced - which will be taxed for you and deductible for the corporation.S-corporation is a combination of the partnership and C-corporation. Similarly - as an employee - you will receiver wages; S-corporation will deduct wages as business expenses and calculate corporate income tax return.

But that taxable income will be passed to shareholder (similar to partnership) , but in the exact proportion with the ownership (one class of stock).So that would be the difference in taxation.

Any questions?

Expert:  Lev replied 1 year ago.

I appreciate if take a moment to rate the answer.

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If you still have any doubts, need clarification - please be sure to ask.
I am here to help you will all tax related issues.