HI ccphill3,
Thank you for posting your question in our forum today!
That is a great question!
Your first true question should be whether or not the LLC has decided to file the LLC tax return as a PARTNERSHIP or be treated as an S-CORPORATION, which is not subject to Self-Employment Tax ("FICA Twice") , but would be required to have payroll to support the purpose and benefits from that non-taxation.
To answer the question in the most basic sense is, if the LLC is acting as a registered partnership, in a state that has state income tax, a state partnership return is required for the business and a State generated Schedule K-1 is provided to each member regardless of their state of origin.
This will require each member to file a State A Resident or State B Non-Resident tax return in State A, regardless of whether they benefit from claiming a loss or not in their home state, if that state does not have a state income tax.
Any passive losses the that Schedule K-1 may reflect for each member will most likely be applied in future years on their State A Resident or State A Non-Resident tax return.
This is normally the requirement in all states that have a state income tax.
I hope this is helpful to you ccphill3!
Regards,
Alan S.
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