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Avoiding Illinois New State Income Tax

Discussion in 'Business & Tax Advice' started by cucr3, Jan 12, 2011.

  1. cucr3

    cucr3 Regular Member

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    I have been paying myself as a sole proprietor and am thinking about starting an LLC. Is there any way to incorporate my LLC in another state, let's say Washington, where there is no state income tax.

    What is required to incorporate it in another state? A physical address, B&M storefront, P.O. box, keeping a residence there?
     
  2. Yukinari84

    Yukinari84 Elite Member

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    You would need to have an actual physical address in another state to "run" your business from. While I don't think you need a full-blown B&M, I think you will need to have some sort of "office" or something similar.

    I would contact your personal tax professional and accountant. If you don't have one, start looking because you should have one if you are running your own business.

    Also, get an LLC.
    It makes things so much easier.
     
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  3. afterimage

    afterimage Newbie

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    My tax attorney says the same thing, you need to have a physical presence in another state to avoid IL taxes. Are you asking because of the situation with Amazon? Just curious.
     
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  4. cucr3

    cucr3 Regular Member

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    No, asking because Illinois wants to raise the state income tax from 3.5% to 5%. I figured if one works online then you could set up shop anywhere.. but I guess that is not the case. Why pay Illinois 5% when I can have a business in Washington and pay 0%.
     
  5. katewil

    katewil Newbie

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    Not a soul wants to pay taxes. Every person does, however, want the stuff taxes pay for though some differ on how they should be collected. State income taxes are despised by some and a few states are considering ditching them, but there's evidence as to how good and bad they really are.
     
  6. Porphyrogenitus

    Porphyrogenitus Junior Member

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    Tax avoidance provides a substantial opportunity for competitive advantage. LLC tax liability is passed through to you, personally. State residency requirements (i.e., the tax liability trigger) are almost always 182 or 183 days. If you get a second home that is technically outside Illinois (Indiana if you live in Chicago) you can avoid by living exactly half the year at each location. This also usually avoids local tax and allows you to cherry-pick sales tax rates. My parents do this in NYC, they have a home in NY and NJ. Their second house is cheaper than the tax, and ofc its an asset they get to keep. Check with a local attorney before you do this, rules might be different there.