What happens if you open your own business (LLC) in one state and then end up moving to another state but still keep the business on the side?

Thank you for your question. First, I will address whether you must be a Pennsylvania citizen or resident to maintain a corporation in that state. Then, I will cover your concerns about being taxed twice on your corporation’s profits.

There are no restrictions on foreign ownership of a company formed in the United States. Nor, are there restrictions on out-of-state residents forming or maintaining corporations in any state. Of course, you should still hire a legal representative in that state to receive mail parcels and lawsuit notices. But outside of this, you do not need to be in the state

Now for the more complicated part. Limited Liability Corporations (LLCs) are not taxed on their profits directly. Instead, profits “pass through” the business and the LLCs members report the profits on their personal federal and state tax returns (if the state has a personal income tax).

Given that you legally reside in – Pennsylvania – the same state that your LLC is located in, that state should not classify you as a “foreign resident” for state income tax purposes – even if you are living in another state as a non-resident and working in a full-time role there. You should file and report your LLC’s income in Pennsylvania as you normally would and file a non-resident return in New York where your full-time job is located. New York will still want you to report the LLC income but most grant tax credits that will help you avoid paying taxes twice on the company’s profits. Because each state has a different tax scheme, however, I would encourage you to message me with the actual names of the states where you are doing business so I can provide advice that is precisely tailored to your needs. I hope this helps.

Need assistance completing your state income tax return? LawTrades has fantastic tax lawyers in every state who can help get your business off the ground. Feel free to message me with any questions!