https://www.tn.gov/revenue/taxes/franchise---excise-tax.html
https://revenue.support.tn.gov/hc/en-us/articles/204647155-W...
Essentially it says if I am a disregarded entity for federal tax purposes I am exempt from both franchise and exercise taxes.
https://revenue.support.tn.gov/hc/en-us/article_attachments/...
How do you even have a single member LLC that is a disregarded entity where the single entity is a corporation? Huh?
That seems to indicate I am responsible for these taxes?
LLC stands for "limited liability company," not corporation [1]. When one says "corporation" in a legal sense, it is typically understood to exclude LLCs. (That said, LLCs can elect to be treated as corporations for tax purposes.)
FWIW, I don't live in TN, but I used to. And I've done sole prop LLC's in a couple states now so I looked into moving back to TN and found this info.
> Since you are an LLC, and you are operating an active business, you will need to file a Franchise and Excise tax return, but you will be exempt from the Excise portion of the tax.
No idea how it works? I'm thoroughly confused.
Euphamism for "That's on the roadmap, but I'm not allowed to announce it yet." Probably.
This will complicate your life in two ways: First, your internet company now has to enumerate subscribers in the same state as you and charge them sales tax. Your competitors, located in friendlier territories, can undercut you by not having to do this.
Second, any payments you make to a SaaS/hosting vendor are now subject to use tax. Do you pay AWS for hosting every month? Get ready to cough up ~6% of that for Texas' treasury. If you're running the kind of business where your hosting bill will grow proportionally to your revenue, this amounts to a tax on revenue. In my case, it wildly exceeds anything California ever charged me in income tax.
Corporations wanted to be people. People pay income taxes on their revenue, not their profits.
https://leginfo.legislature.ca.gov/faces/codes_displaySectio...
I'd be happy to know about other states which have similar laws.
https://www.ftb.ca.gov/businesses/Doing-Business-in-Californ...
For taxable years beginning on or after 1/1/2011, a taxpayer is doing business in California if it actively engages in any transaction for the purpose of financial or pecuniary gain or profit in California or if any of the following conditions are satisfied:
> The taxpayer is organized or commercially domiciled in California.
> Sales, as defined in subdivision (e) or (f) of R&TC 25120, of the taxpayer in California, including sales by the taxpayer’s agents and independent contractors, exceed the lesser of $500,000 [1] or 25 percent of the taxpayer's total sales.
> Real and tangible personal property of the taxpayer in California exceed the lesser of $50,000[1] or 25 percent of the taxpayer's total real and tangible personal property.
> The amount paid in California by the taxpayer for compensation, as defined in subdivision (c) of R&TC 25120, exceeds the lesser of $50,000[1] or 25 percent of the total compensation paid by the taxpayer.
> For the conditions above, the sales, property, and payroll of the taxpayer include the taxpayer's pro rata or distributive share of pass-through entities. "Pass-through entities" means partnerships, LLCs treated as partnerships, or S corporations.
So if your 'HQ' is in California, if 25% of your sales are in California, if more than 25% of your property is in California, or if more than 25% of the total compensation you pay is in California, you need a California LLC.
Two big advantages to Delaware:
1. Fast courts. When I last looked, it was 180 days from complaint to decision in the Superior Courts while California took 900+ days. (Also notable, Delaware proudly publishes these statistics. California's were tougher to find.)
2. Developed law. Since most companies are in Delaware, most law is settled in Delaware. Lots of edge cases have been smoothed out. It's also a more business-friendly code than California's.
That said, everyone's situation is different. Consulting with a lawyer is advisable.
Two different people? Aren't those words synonyms?
Be aware that if you are "doing business" in California which means you live there you also have to file as a California foreign entity and pay the absurd anti-small business flat tax of $800 a year.
This also does not include your state income tax liabilities in California. Just because the LLC is formed in Delaware does not mean you don't have to pay income taxes in the state you reside. Delaware is just the legal residence, has nothing to do with income taxes.
I moved to Tennessee in January and switched my single-member disregarded entity LLC from California to Tennessee. The annual fee in Tennessee is $400 vs $800 and there is NO STATE INCOME tax in beautiful TN.