LLC in which state and tax return complications

[Aman A.]

Hello everyone,

I live in Washington state and have a few rental properties in Alabama. I want to open a LLC for any future buy and hold deals and keep the properties in an LLC. The LLC will be owned by myself and my wife. I have a few concerns about it and haven't been able to get concrete answers on these:

1. Since Alabama is not a community state, so I need to file partnership tax returns for such an LLC?
2. If yes, will it help if I open a WA state LLC for the Alabama properties? According to Alabama's dept or revenue single member LLCs are considered disregarded entities.

Thank you for the help.

[Eamonn McElroy]

@Aman A.

"Since Alabama is not a community state, so I need to file partnership tax returns for such an LLC?"

Alabama follows federal. If the taxpayer/spouse LLC is treated as a disregarded entity for federal purposes, you would generally file AL Form 40NR. If it is treated as a partnership, you would generally file AL Form 65.

Alabama also has other forms & obligations, particularly the business privilege tax depending on your facts and circumstances.  You might want to check with your CPA.

"Alabama's dept or revenue single member LLCs are considered disregarded entities."

Yes, but the LLC you're proposing has two members: you and your wife. That doesn't necessarily preclude you from disregarded entity treatment for the LLC, but means that statement wouldn't apply to you.