Two member LLC filing as a Partnership. Last year they had offices only in the state that they both reside. Since that time, they have expanded and set up offices in three more states. At least one of the states does not allow composite filing. I want to make this as simple as possible. So, in total, will I: File the Partnership 1065 Fed and each state, and K-1's for each partner for each state? Will each partner then need to file a 1040 NR for each state with a physical presence?
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Yep, that's what will be required.
Also, many states require state income tax withholding on all distributions to nonresident partners. That state withholding, of course, is then reportable on each respective partner's K-1, who in turn reports it on his own state income tax returns.
Btw, I would not opt for composite filing even for the states that allow it. When you do, the income is always taxed at the state's highest tax bracket, whereas if the partners file NR returns for those states, they will usually pay tax at lower rates ... and sometimes pay no state tax at all.Roland Slugg
"I do what I can." -
Thank you! I appreciate the clarification. I was thinking the same thing about the composite, and I appreciate your confirmation on that.Comment
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