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Level 1

Do members of an LLC in different states have to file personal tax return in each state?

If members of an [delaware] LLC that is taxed as a partnership are located in different states and not the same, do each member have to file a personal tax return in each state? Eg, Bob is located in OH, and Joe is located in AZ and the LLC is hq in OH. Would Bob also need to file taxes in AZ while Joe also have to file in OH?

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Accepted Solutions
Level 10

Do members of an LLC in different states have to file personal tax return in each state?

This can be complicated, however, the following will provide some guidance:

  1. Each member will typically report ALL the LLC income in their state of residence.
  2. In addition, each member may need to file in each state in which the LLC does business.
  3. Item #2 may need to be handled differently depending on the state; some states in which the LLC does business may want the LLC to withhold and remit the withholding for nonresident members.  Some states allow the LLC to file a composite tax return on behalf of the nonresident members.
  4. Depending on how item #3 is addressed, this will dictate how the nonresident member must file in a state in which the LLC does business and it is not their state of residence.
  5. Should a member need to file a state return in more than one state, typically their state of residence will provide a credit for taxes paid to other states to minimize the "double" tax impact.
  6. Also be aware, that some states are considered "reverse credit states" where any credit for taxes paid is taken on the member's nonresidency state.  This is not real common, but can be an issue to be aware of.
  7. So the bottom line for you is the LLC will need to determine which states it does business and then file the appropriate forms, returns, withholding, etc.  
  8. You may want to consult with a tax professional the first year to get you started down the right path.  Incorrect filing, not withholding where appropriate can be an expensive "lesson" if not done correctly.
*A reminder that posts in a forum such as this do not constitute tax advice.*

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2 Replies
Level 15

Do members of an LLC in different states have to file personal tax return in each state?

They only file returns in the states where they live. 

Level 10

Do members of an LLC in different states have to file personal tax return in each state?

This can be complicated, however, the following will provide some guidance:

  1. Each member will typically report ALL the LLC income in their state of residence.
  2. In addition, each member may need to file in each state in which the LLC does business.
  3. Item #2 may need to be handled differently depending on the state; some states in which the LLC does business may want the LLC to withhold and remit the withholding for nonresident members.  Some states allow the LLC to file a composite tax return on behalf of the nonresident members.
  4. Depending on how item #3 is addressed, this will dictate how the nonresident member must file in a state in which the LLC does business and it is not their state of residence.
  5. Should a member need to file a state return in more than one state, typically their state of residence will provide a credit for taxes paid to other states to minimize the "double" tax impact.
  6. Also be aware, that some states are considered "reverse credit states" where any credit for taxes paid is taken on the member's nonresidency state.  This is not real common, but can be an issue to be aware of.
  7. So the bottom line for you is the LLC will need to determine which states it does business and then file the appropriate forms, returns, withholding, etc.  
  8. You may want to consult with a tax professional the first year to get you started down the right path.  Incorrect filing, not withholding where appropriate can be an expensive "lesson" if not done correctly.
*A reminder that posts in a forum such as this do not constitute tax advice.*

View solution in original post

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