Posted by KenK on July 05, 2007 at 11:07:17:
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Forming LLC across state lines (PA vs MD) - Posted by KenK
Posted by KenK on July 04, 2007 at 16:44:10:
I have been doing a few deals to buy-fix-sell business in PA. I reside in MD. I have some arrangments in the works to escalate my “hobby” into a real business. I have yet to form my LLC, but need to do so shortly. Are there any tax or other considerations to forming in one state vs the other? I will consult with a new accountant once I get some referrals and certainly prior to forming the biz entity however looking to hear any thoughts prior.
Many thanks.
Ken
Re: Forming LLC across state lines (PA vs MD) - Posted by JOHN HASLACH, CPA, MST
Posted by JOHN HASLACH, CPA, MST on July 08, 2007 at 07:57:47:
Have not dealt with LLCs and LPs in PA in a few years, but you might find PA taxes LLCs and not LPs. Check it out.
“Doing Business” definition - Posted by John Merchant
Posted by John Merchant on July 05, 2007 at 09:35:12:
As Rich says, an LLC or corp that is DB (doing business)does need to register in all states where it is so operating.
But DB needs to be thought through and understood as what, exactly, it means legally as pertaining to you.
The mere buying and holding a property for resale is NOT DB as it’s been defined by court decisions over the years…but operating a rental IS DB in all states that have litigated the issue.
Likewise if you or I are buying, fixing and flipping constantly and with some heavy numbers, that might be considered DB so as to make us want to register in all states where we’re so operating.
So my advice would be to go slow on calling your operation “a business” as your costs go up when you do so.
Whereas, for sure, you really need to register your State A LLC/Corp in State B,C, etc. if you ARE DB in those states, so as to protect yourself legally and be able to sue and defend yourself if sued…no need if you’re really not DB in those other states.
Your local courthouse or law school library will have a little paperback book by CT Corporation entitled “What Constitutes Doing Business” and I’d recommend anybody entertaining the notion of operating in more than your home state do some studying of that little book.
It’s printed anew every year so as to list every court decision in the USA where DB was an issue so you can quickly find the law on same in every state.
Re: Forming LLC across state lines (PA vs MD) - Posted by Rich-CA
Posted by Rich-CA on July 04, 2007 at 19:21:28:
You will at least have to register the LLC in the state where you do business. If you decide to create the LLC out of state, then you’re better off forming it in another more friendly state than either PA or MDate… After all, out of state is out of state.
Re: “Doing Business” definition - Posted by JOHN HASLACH, CPA, MST
Posted by JOHN HASLACH, CPA, MST on July 05, 2007 at 13:36:01:
Even though you may not be “Doing Business”, for tax purposes, any income or gain from the property will be subject to tax in the state in which the property is located. The income or gain will also be subject to tax in your resident state. Most likely you will get a credit in your resident state for the taxes paid to the state in which the property is located.