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Posted by Katie on August 21, 2007, 11:53 pm
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> I am a New Hampshire resident looking to form a company for
> the purpose of investing in real estate, primarily via the
> Internet, as I am legally blind and travel is difficult.
>
> I have decided on an LLC for the legal and financial
> protection it affords me, but I am unsure of the tax
> consequences.
>
> As a pass-through entity with onlu one member, income taxes
> seem straightforward at the federal level, but I seem to be
> getting conflicting information about state business taxes.
>
> NH has both a business enterprise tax and a business profits
> tax. Do these aply to an LLC such as mine? It would seem
> that they would apply only if I elected taxation as a
> corporation, but it isn' defined that clearly.
All business organizations, including corporations,
partnerships, LLC (single or multiple member), and sole
proprietorships are subject to the New Hampshire BPT and the
BET. However, the tax applies only to income from NH
activity.
> Also, I read somewhere that incorporating in the state of
> Wyoming would allow me to avoid the NH business taxes, since
> WY has none, and a single member LLC is not considered to
> have an 'wmployee', so would only have to file federal
> income taxes + Schedules C & SE.
No, incorporation in Wyoming (or Nevada, etc.) would not
save you any state business taxes. State income and
franchise taxes are imposed by the states where the entity
does business, not necessarily where it is organized. If it
does business in NH, it will be subject to the BPT and BET.
You should also be aware that you, as the single owner of
this LLC, will be subject to individual income taxes in most
states where the LLC owns property or does business. In
general, you will report and pay tax on the LLC's income
from sources (property, in your case) in each state on a
nonresident individual income tax return. This will be true
in all states except for those that do not impose
comprehensive individual income taxes (Nevada, Wyoming,
South Dakota, Washington, Florida, Texas, Alaska, Tennessee,
and, of course, New Hampshire). Some states (e.g., Texas)
will tax the LLC as if it were a corporation. Some other
states will impose an entity-level tax or fee on the LLC
itself in addition to individual income tax on you as the
owner (e.g, California).
> Lastly, and I know it's more of a legal question, would I
> have to register the LLC in all states I wished to do
> business, even if I never take physical ownership of any
> property in those states?
No, you would not have to register the LLC in any state
until it acquires property or otherwise does business in
that state. Then it would have to be registered.
Katie in San Diego
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