Forming Out of State LLC

[ferrycorsten]

Quote from tiddlywinks:

So let me get this straight... You are a CPA, and I'm just guessing you live and/or work in Ohio or in one of OH reciprocal tax states. As a CPA with a Masters in Taxation, you NEED taxes in order to earn a living. The more taxes (regardless of name or characterization) , the more complex the tax code, the better. That's fine, but a tax is still a tax. It is also fine that some people opt to reside in places where taxes (regardless of name or characterization) are fewer and persons do not need to concern themselves with state tax code idiosyncrasies.

This thread was/is about "forming LLC out of state" I hope the op doesn't plan to place any OH real estate in the LLC.

Trade On!

I do not live anywhere near Ohio. And I have some clients who have to file returns in 40+ states. That does not mean they pay state tax 40 times. Whatever nonresident tax they pay gets taken as a credit on their resident return.

Different taxes are not at all equal. You cannot deduct Social Security and Medicare on your federal return like you can for state or property taxes. Estate tax has nothing to do with income. Just because something ends in "tax" does not mean they are alike.

I strongly recommend consulting with a tax professional over taking advice from an internet forum. The amount of misinformation on here is staggering.

 

[comintel]

Quote from ferrycorsten:

This is incorrect. He gets a credit on his Ohio return for taxes paid to other states.

I did not say otherwise. Of course their are credits.

He still has to file in two states. Yes there are tax credits which may bring the taxes close to zero in some cases but he will still likely be paying at least some licenses, franchise taxes, etc. in each state, as well as tax planning and preparation time, remittances, etc.

Instead of nit-picking, why don't you comment on the substance as to whether it is a good idea rather than vapid generalities about seeking advice from professionals. The answer is no, it is not a good idea, in most cases.

 

[ferrycorsten]

Quote from comintel:

I did not say otherwise.

He still has to file in two states. Yes there are tax credits which may bring the taxes close to zero but he will still likely be paying at least some licenses, franchise taxes, etc. in each state, as well as tax planning and preparation time, remittances, etc.

Instead of nit-picking, why don't you comment on the substance as to whether it is a good idea. The answer is no in most cases.

His liability in Ohio is likely to be zero, he never needs to pay a deposit, therefore he is paying tax in one state. A SMLLC is a disregarded entity, there is no tax planning required for such a simple structure, you would be better off with turbotax than paying top dollar for a qualified professional to basically sign their name.

 

[tiddlywinks]

Quote from ferrycorsten:

His liability in Ohio is likely to be zero, he never needs to pay a deposit, therefore he is paying tax in one state. A SMLLC is a disregarded entity, there is no tax planning required for such a simple structure, you would be better off with turbotax than paying top dollar for a qualified professional to basically sign their name.

You may be a CPA (with a Masters in Taxation) but you clearly know nothing about trading as a business. Why are you even posting here? No tax planning for a SMLCC?!?! Do your homework. An SMLCC is only a disregarded entity if the owner does not explicitly elect to be treated as a corporation in the eyes of the IRS. The difference in tax advantages between a schedule c trader (disregarded entity) and 1120(s) filings is huge!!

While we don't know what the op trades, here's a test for you...
In almost all situations, why is a C-Corp election a worse choice than even a disregarded entity for a futures trader?

No tax planning for a SMLCC? Your degrees make you conventional and impotent, not in any way associated with being knowledgeable about the subject of trading as a business.

Trade On!

 

[ferrycorsten]

Quote from tiddlywinks:

You may be a CPA (with a Masters in Taxation) but you clearly know nothing about trading as a business. Why are you even posting here? No tax planning for a SMLCC?!?! Do your homework. An SMLCC is only a disregarded entity if the owner does not explicitly elect to be treated as a corporation in the eyes of the IRS. The difference in tax advantages between a schedule c trader (disregarded entity) and 1120(s) filings is huge!!

While we don't know what the op trades, here's a test for you...
In almost all situations, why is a C-Corp election a worse choice than even a disregarded entity for a futures trader?

No tax planning for a SMLCC? Your degrees make you conventional and impotent, not in any way associated with being knowledgeable about the subject of trading as a business.

Trade On!

The default classification for a SMLLC is disregarded; no election is needed. Furthermore, an SMLLC does not determine whether or not you have a Schedule C, that is dependent on making an S election.

Why am I posting here? Because I thought I would educate the uninformed. But if you want to take bad advice, or even worse pay for it, be my guest.

 

[tiddlywinks]

Quote from ferrycorsten:

The default classification for a SMLLC is disregarded; no election is needed. Furthermore, an SMLLC does not determine whether or not you have a Schedule C, that is dependent on making an S election.

Why am I posting here? Because I thought I would educate the uninformed. But if you want to take bad advice, or even worse pay for it, be my guest.

Ummmm... if an SMLLC as a disregarded entity generates income, the taxpayer/owner files a 1040 with a Schedule C!

An S-Corp via election or direct incorporation, files 1120s and issues a K1 to the taxpayer(s)/shareholder(s)! How any particular shareholder/taxpayer deals with the K1 has absolutely nothing to do with how the S-Corp was started. The ability or not to file a Schedule C rests squarely with the recipient of the K1 and their individual situation.

Plus you didn't answer the question that was posed.

I'm done with you. And happy as hell to be your guest!

Trade On!

 

[ferrycorsten]

Quote from tiddlywinks:

Ummmm... if an SMLLC as a disregarded entity generates income, the taxpayer/owner files a 1040 with a Schedule C!

An S-Corp via election or direct incorporation, files 1120s and issues a K1 to the taxpayer(s)/shareholder(s)! How any particular shareholder/taxpayer deals with the K1 has absolutely nothing to do with how the S-Corp was started. The ability or not to file a Schedule C rests squarely with the recipient of the K1 and their individual situation.

Plus you didn't answer the question that was posed.

I'm done with you. And happy as hell to be your guest!

Trade On!

You just don't understand. An individual trading by himself has a schedule C regardless; whether he is a SMLLC is irrelevant, unless he makes the S election.

 

[RedSun]

I'll probably chat with Legalzoom and ask them.

I had a single member LLC in Texas, but we moved away. In Texas, I only need to file a Texas Franchise no-tax due statement since my revenue/income was far below the threshold.

Of course any income falls under Schedule C. There was no Texas state income tax.

TurboTax was all I needed for both Federal ans State tax.

Now it appears the best way is to form a LLC in home state. I do not think I can avoid the state tax even if I still use the LLC in Texas.

 

[ofthomas]

Quote from ferrycorsten:
I strongly recommend consulting with a tax professional over taking advice from an internet forum. The amount of misinformation on here is staggering.

+1

 

[comintel]

+1

Nobody is giving or taking advice here. Nobody is that stupid. They are helping people identify likely problems and issues that they can then pursue on a much more detailed basis with whoever they choose.

In any case, it is hardly the case that the accounting profession has uniform advice to give. You have clear examples of one accounting firm denouncing the advice of other accounting firms on how to deal with trader status etc.

In fact, this very thread is the likely result of bad widely-disseminated "expert" advice that people should incorporate in a low or no tax state.

I think these threads are an *excellent* basis for traders to *begin* to approach the issues involved and the variety of opinions that exist on certain issues.

Just going to an arbitrary local accountant without any understanding of the issues is *not* the way to go.