Incorporated in California. One partner moved to Hawaii last year, where payroll taxes, income tax withholding, sales tax etc. have been set up. Other partner remained in CA. Business is a website with customers located throughout the country, including CA and HI.
Does the corporation have to file corporate returns in both states?
In case it matters, we're technically a LLC electing to file as a S-Corp.
It depends, but probably. Although the business is formed in California, you would have a filing requirement in Hawaii if you have a business nexus there. Your business can be considered to have a nexus in Hawaii if it is generating income from Hawaii.
Hawaii will not assess a corporate tax on the business, however, because it follows the Federal treatment of the pass-through nature of the business income. Your partner/shareholder who lives in Hawaii will be responsible for the Hawaii income tax on the pass-through income on his personal tax return.
For this reason, it is probably a good idea to fulfill a Hawaii return on behalf of this shareholder, especially if his/her income is not California sourced. It can assist the shareholder to not have to file additional state tax returns on the personal return.
It depends, but probably. Although the business is formed in California, you would have a filing requirement in Hawaii if you have a business nexus there. Your business can be considered to have a nexus in Hawaii if it is generating income from Hawaii.
Hawaii will not assess a corporate tax on the business, however, because it follows the Federal treatment of the pass-through nature of the business income. Your partner/shareholder who lives in Hawaii will be responsible for the Hawaii income tax on the pass-through income on his personal tax return.
For this reason, it is probably a good idea to fulfill a Hawaii return on behalf of this shareholder, especially if his/her income is not California sourced. It can assist the shareholder to not have to file additional state tax returns on the personal return.