LLC - "Doing Business in California"

[Sara Klaus]

We are purchasing our second investment property in Hawaii. Our first property in Hawaii is owned by "Property 1 LLC," which was formed in Hawaii. This is a multi-member LLC. We live in California, and self-managed the property so we had to file taxes in CA as we were seen as doing business in Hawaii. We made some mistakes when forming this business, and we're trying to clean up the situation.

Current Set-Up

Property 1 LLC has business bank account, all profit and expenses go through that account. Tax docs are filed in Hawaii and California.

New Set-Up Plans:

I own an S-Corp that is a real estate brokerage and property management company. We have now opened a trust account for managing vacation rentals, and will pay ourselves a management fee from this account, just like we do my PM business. 

Rental income goes into trust account - expenses paid from this account, including management fee - then owner disbursements will be sent from trust account to owners personal accounts quarterly with these profits.

In this scenario, the LLC is strictly a holding company. Owners are receiving profits based on the rental activity of the property.

Question: Would the LLC still be considered 'doing business' in California? Owners live in CA, but the properties are now being managed by a company rather than being self-managed. Is this a question for a CPA or a business attorney? 

[Nate Meeker]

Quote from @Rich Chavez:

So your paying the GE tax in Hawaii and than getting taxed in CA too?  

You would have to pay the applicable HI LLC fees and CA LLC fees. CA taxes your global income but provides credits for taxes you paid to other states.