QUESTION

How could my LLC's address affect my tax requirement if I am planning to do pass-through taxation?

Asked on Jun 19th, 2015 on Taxation - Michigan
More details to this question:
My roommate and I are planning to register an LLC (a web startup)]. We work from home. We were told that if we register the LLC at my roommate's parents' house in the suburbs, we can avoid paying the higher city taxes.Two questions:1. Will this work if we are planning to use pass-through taxation for our LLC? We will be filing our personal taxes in Philadelphia. As I understand it, pass-through means that the LLC is ignored for tax purposes, so it's address shouldn't matter. Is that correct?2. Is this something we could get in trouble for? I am not completely clear on how "place of business" is determined. Our business is completely online so we do not really have a location.
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2 ANSWERS

Commercial & Bankruptcy Law Attorney serving Powell, OH at Ronald K. Nims
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Pass through taxation applies to Federal income taxes, it doesn't necessarily apply to state and local taxes. Some states and cities tax at the entity level and some tax at the owner level. In either case, all cities and states tax based on the "three factor formula" where the work is performed, where the sales are made and where the the business property is located. If all the work is done in Philly, all the sales are made out of Philly and all the business property (probably a computer or two, maybe a server and some inventory). Then it will be subject to Philly city taxes. It doesn't make a bit of difference what the address of the organizer is. In fact, it's quite common if a lawyer is used to have the lawyer's address on the filing.
Answered on Jun 22nd, 2015 at 12:22 AM

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Appellate Attorney serving Grosse Pointe Farms, MI at Musilli Brennan Associates, PLLC
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The taxation issue is not an issue. City taxes are determined by the residence of the parties to whom the income is passed through to. Care should be taken to avoid a venture which taxes the entity as well. The registered office should be carefully selected as it will determine in some cases what courts have jurisdiction. Get an attorney and do everything right the first time. Penny wise is dollar foolish.
Answered on Jun 19th, 2015 at 10:29 AM

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