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emc011075, Tax adviser
Category: Tax
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Experience:  IRS licensed Enrolled Agent and tax instructor
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I have a question about incorporating a business as an LLC.

Resolved Question:

Hi I have a question about incorporating a business as an LLC. Should I make my llc in my home state or in a separate state?
Submitted: 11 months ago.
Category: Tax
Expert:  emc011075 replied 11 months ago.

Hi. My name is ***** ***** I will be happy to help you.

What are your plans? Single member LLC or do you plan to incorporate?

Customer: replied 11 months ago.
It would be just one full-time employee (me). I may have another employee do part-time work. So I'm not sure which would make the most sense. I am a political consultant in Virginia and have clients in several states... I'm not sure if that makes a difference
Expert:  emc011075 replied 11 months ago.

If you are single member LLC (you will not be the employee but the business owner), you will be taxed as solo proprietor in your home state. You can have clients across the US but if you don't physically work in those states you will not need to file returns in those states.

If you incorporate (corporation or scorp) you will become employee of your own corporation which means payroll, payroll returns and separate business return in addition to your personal return. You will be taxed in the state you incorporate (business profits) and in state you physically work (wages).

If you don't necessary want the corporate perks like 401K, subsidized health insurance or stock option, single member LLC is easier to run.

Customer: replied 11 months ago.
Great. So I think I'll do the Single member LLC. And then I will pay income taxes in my home state (which is Virginia)? Does the LLC also pay income taxes, or am I the only one taxed? And do I need to incorporate if I hire another part-time employee? Also, if I were to incorporate in a state such as Nevada or Wyoming without an income tax, would that make a difference? Or would I still pay taxes in my home state either way?
Expert:  emc011075 replied 11 months ago.

A single member LLC is disregarded entity for tax purposes, which means the LLC itself doesn't pay any taxes. The profit/loss is reported on Schedule C and than directly on your 1040. You do not need to incorporate to hire employees but you will need to apply for EIN.

Nevada or Wyoming may not have any income tax but the states charge annual registration and license fees and you would most likely not have any corporate profit anyway if you pay yourself salary that would be taxed in your home state. Most small corporation do not have a lot of profit since most of the revenue is deducted as wages to the owners.

Expert:  emc011075 replied 11 months ago.

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

Expert:  emc011075 replied 11 months ago.

And if this answered your question, please take a moment to rate my response so that I may receive credit for assisting you today. You find the rating bar on the top of the page – 5 stars. However, if you need clarification, or want to discuss this issue further, let me know. Thank you.

Customer: replied 11 months ago.
No further questions. However, I was told this was only going to be $5 when I asked the question -- but I was just charged $49. How do I dispute this or have them refund me this discrepancy?
Expert:  emc011075 replied 11 months ago.

I do not have any control over the billing but from what I know is that the $5 is a deposit. One you receive the answer the remaining is charged to the CC I am assuming as a refundable deposit as well because until you accept my answer I will not get paid anything.

Let me check with the customer service.

Customer: replied 11 months ago.
That's not what was advertised on the site. My bank account was already charged $49, so I don't want to accept anything if that means I'm going to get charged even more.
Expert:  emc011075 replied 11 months ago.

Again, I am just the user of the website and only get paid if you accept the answer. If you do not want to accept it, that's fine.