LLC in a different state

[causer]

Hi - I created an LLC in TX to manage my rental property in TX but I live in CA. It was single member LLC when incorporated but now it's a partnership LLC. I have a few questions:

1. I changed to partnership LLC in 2024. Should I file my taxes for 2023 as single member LLC or partnership LLC?

2. There is no option in TT to select the state where it was incorporated (TX in my case). LLC formation document has my CA address in it. TT is treating this LLC as it was incorporated in CA.

3. Do I have to file CA Schedule K-1 form 568 and 562? I don't have any rental income from 2023, only LLC incorporation expense.

Thanks

[PatriciaV]

1. Report the 2023 activity for your SMLLC on Schedule C of your personal return. The change in entity type didn't occur until 2024.

2. For a SMLLC, the state of incorporation isn't relevant. But be sure you entered a Texas business address for Schedule C. If you have income sourced in Texas, you may need to file a Texas Franchise tax report. Otherwise, the activity is reported your resident state income tax return.

3. California Form 568 is filed if your LLC is registered in California, even if it isn't actively doing business in California or doesn't have a California source of income.

[causer]

Thank you, @PatriciaV. I have a follow-up question.

2. For a SMLLC, the state of incorporation isn't relevant. But be sure you entered a Texas business address for Schedule C. If you have income sourced in Texas, you may need to file a Texas Franchise tax report. Otherwise, the activity is reported your resident state income tax return. 

Question: Can I enter the LLC's registered agent address in TX as the company address, even though the company address is my home address in CA?

3. California Form 568 is filed if your LLC is registered in California, even if it isn't actively doing business in California or doesn't have a California source of income.

Question: Since my LLC is not registered in CA then how can I avoid entering the information for CA form 568 and 562?

[PatriciaV]

Yes, you can use the registered agent's contact info, with their permission.

When you work through the California business section, do not check the box for "Single Member LLC." Form 568 will not be included. (Interpret this as "do you have a California SMLLC?")

[causer]

HI @PatriciaV - I don't see the option to select/not select "Single Member LLC". I entered my registered agent's address as my company address.

Thanks

[causer]

Hello - Can you please help me with my question. I don't want to create forms 562 and 568. Business is in TX and I want it to be treated like that.

Thanks

[PatriciaV]

If you didn't report a SMLLC on the California return, no Form 568 or 562 should have been created.

@causer 

[causer]

Hi @PatriciaV  - 

I am putting my registered agent's address as my company address, and there is no option to enter or not enter if this is a SMLLC or not. 

If the form 568 and 562 are generated then do I have to send paper returns to CA state? It is asking me the date LLC was started in CA. 

Thanks 

[causer]

Also, I have to enter details of my SMLLC somewhere and since my home address is in CA, TT is considering the LLC is in CA and generating forms 568 and 562. 

I don't want the forms to be generated, so how and where can I stop that? There is NO income in 2023 and all i want is to enter LLC start-up costs in there. 

Thanks 

[PatriciaV]

Return to the rental property profile for the LLC. On the page "Is this a rental property or royalty?" did you enter a Texas address for the LLC? The actual property address is the best choice.

If this doesn't affect the California return, go to California Sch E Wks in Forms Mode. Under Line 1, check to see if there is a link to SMLLC Form 568. If so, you may be able to break this link (delete the entry).

Note that if you have not purchased a rental property for the LLC or haven't actually listed a property for rent, you may want to wait to report this activity until next year. Startup costs for rental activity is amortized over at least 180 months, starting on the date the property is listed for rent.

[causer]

HI @PatriciaV - Thank you for all your help and guidance.

I bought the property and created the LLC in 2023. Property is not in the name of LLC yet and it was not rented at all in 2023. I got the tenants in Jan'2024.

Now, a couple of questions:

1. Do I still have to file the tax return for LLC even though there was no activity in 2023 except the start-up cost?

2. Can I claim my LLC start-up cost expenses next year?

Thanks

[PatriciaV]

1. No, you do not file a tax return until the LLC has activity to report.

2. Yes, you will be able to report the start-up costs in the year when you have activity for the LLC. They are not eligible to be fully deductible, but you will be able to start amortization for that tax year.

Since the property was not offered for rent, you have an investment not a rental property. There are no deductions related to investments other than investment interest, if that applies.