Hi Chris
It's a nice fantasy. And I understand why you would want to do that.
But if you've got a functioning business in Michigan, and you're
running it from California, and getting business mail in California,
and having business associates, customers, vendors, etc. calling you
in California...
You've heard the old saying, yes? If it walks like a duck, and quacks
like a duck, and looks like a duck, odds are - it's a duck.
In other words, you're doing business in California.
Briefly, the state of California spells out that out of state
corporations doing business in California, must register here, too.
http://www.taxes.ca.gov/corpc.html#Doing
Now, I know you didn't say anything about a corporation.
But, whatever form of business you open in Michigan, you'll still
be running it from California. The concept is the same for all businesses.
Of course, you asked about revoking your California residency
by setting up an address in Michigan, while living here 10 months of the year.
Here's what the Great State of California has to say about that:
http://www.taxes.ca.gov/resident.html#Definition
"A resident is also an individual whose permanent home is in
California but who is outside of California for a temporary purpose.
For example, an individual goes on vacation in another state or works
there temporarily. The individual still maintains residency in
California and intends to return."
In order not to be a California resident, you:
Can't have your home here.
Must register to vote in Michigan.
You drivers license must be a Michigan license.
You can't have substantial connections to the community, like
doctors, advisors, memberships to clubs, religious institutions, etc.
You (your wife) can't have a long-term job here.
Why is it in your best interest not to play games with your residency,
aside from having to pay California's high tax rate?
In order to maintain the illusion of non-residency, all your:
Mail must be sent to Michigan and forwarded here.
Think of the time you waste and the cost of forwarding it.
If you enter into a contract that doesn't work out and want to sue,
you have no standing in a California court. Your case will be thrown out.
You will have to pay for a Michigan phone number or toll-free number
and all your California friends and associates will have to call you on it.
You constantly have to be on your guard not to shatter the illusion of
your lack of California residency.
It's no fun. And it can be costly.
So, if you're going to live in California, sit down with a good, local
tax professional and work out the best way to structure the Michigan
business so you pay the least tax overall - both in Michigan and California.
Sorry to be a downer. But I've seen the mess people have gotten themselves
into doing this, and getting caught.
If you need anything clarified, other than a full tax plan,
please let me know.
Best wishes,
Your TaxMama-ga |
