"The Rainmaker" <Brigadoon_8[at]nospamjuno.com> wrote:

- quote -

If you make the default choice to have the LLC be a tax
"pass-thru" entity like a partnership then the partners will
include their share of LLC income and gains in their
personal tax returns. Since you are California residents,
California will tax you at the individual level. It is
possible to elect to have the LLC taxed like a C
Corporation, but only do this if you are *very* sure you
know what you are doing.

Bob Daniels

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"The Rainmaker" <Brigadoon_8[at]nospamjuno.com> wrote:

- quote -

No. As California residents, you will pay taxes to
California on all of your income passed through from the
LLC. California residents are taxable on all income,
regardless of source.

If you "checked the box" to have this LLC taxed as if it
were a C corporation, you would be correct with respect to
the corporate level tax. The corporation would apply a
three-factor formula (with double-weighted sales) to compute
its California taxable income. This would be true, BTW,
regardless of the place where the LLC is organized.
California, Nevada, makes no difference.

However, you and your partner would then be employees of the
corporation, and as California residents you would be
taxable on 100% of your compensation. If the corporation
distributed dividends to you, that income also would be 100%
subject to California tax.

The only way to get the non-California source income arising
from this enterprise out of California taxation is for you
and your partner to move to and reside in another state.

Katie in San Diego

The foregoing is intended for educational purposes only and
does not constitute legal or professional advice.

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"The Rainmaker" <Brigadoon_8[at]nospamjuno.com> wrote:

- quote -

To put it simply -- NO. You are a California resident and
are taxable on "worldwide" income of the LLC.

Vida Freeman, EA

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My partner and I have settled on an LLC (vs. S Corp.) to buy
and sell income property in several states, including
California.

We both live in California. I believe if we form a
California domestic LLC, we will pay income and capital
gains taxes to California, regardless of which state the
property is located in.

But if we form our LLC in Nevada and register in California
as a foreign LLC, we will avoid California taxes on the
income and gain of 'out-of-state' properties.

Am I correct with this assumption?

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