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alxnlsn
09-18-2009, 03:06 PM
Hello,

I hope this has found the correct location and I apologize in advance if it has not.

I have an LLC in PHX, AZ and we are looking to sub contract work to independent contractors in FL. What do I need (licenses, etc..) to be able do this? Will I have to pay taxes in FL too? Or since the "base" operation is in AZ, will the work fall under AZ taxes?

vangogh
09-18-2009, 03:53 PM
I think you found the right place. If not, it's certainly close enough :)

This isn't my area of expertise so take everything I say with a grain of salt. My response is more guestimate than actual facts.

If you're subcontracting then you shouldn't be responsible for their licensing. You're hiring them to do a job, but not hiring them as an employee. When someone is hiring you to do your job they don't have to go out and get licensing for your work. You'd have to do that. In the case of contracting with an independent contractor you're now in the role of the customer hiring you. The independent contractor needs to be licensed to work in FL You shouldn't need to be.

It's possible the nature of your work and the specific states in question could have their own rules so the ultimate authority is going to be the two states. However I think what I said above is true. It's the nature of subcontracting and hiring independent businesses.

Hopefully one of our members more up on the legal and account will chime in behind me and give you a better answer.

Evan
09-18-2009, 09:27 PM
You are sub-contracting work to other people for jobs you receive in Florida? So, you, in essence are doing business as AZ LLC in FL, but are having anybody in FL to actually perform the work?

What you seem to be asking seems, to me, a bit impractical. Wasn't aware that a person in FL would seek a contractor in AZ to do the work. So how exactly are you getting this business?

If you plan to advertise and do business in Florida, you WOULD be subjecting yourself to their rules.

vangogh
09-19-2009, 01:27 AM
Evan he could be working online. For example I'm in Colorado, but could easily outsource to someone outside of Colorado. I wouldn't think in that case I'd be subject to any taxes in the other state or be operating under their rules at all.

I think the type of business is going to play a factor in answering the question.

Evan
09-19-2009, 11:28 AM
Working online can be different, as the work is being performed in your home state.

But say it was a construction job. There is no way you can complete construction without actually being in the state.

Business Attorney
09-19-2009, 11:29 AM
It really depends on what you are doing for the customer and what the subcontractor is doing for you. The lines can be very gray. And the answer will likely vary from state-to-state, since the question of what constitutes "doing business" in a state is determined by that state's law.

For example, let's say you are an HVAC contractor and a company hires you to install a system in a building in Florida. Rather than send your crew from AZ, you hire a licensed contractor in FL to install the system. Since the actual work is being performed by a licensed FL contractor, my guess (and I am not a FL lawyer) is that you would not need a contractor's license but you might be considered to be doing business in Florida since the subcontractor is acting as your agent to complete the project in FL on your behalf.

If you tweak the same facts slightly, so that the company hires you to manage the project and it is clear that all of your construction management services are being performed in AZ and that your job is to hire and pay a subcontractor in FL to actually install the system, it seems less likely that you would be considered to be doing business in FL.

I can't say that the outcome in the first example would constitute doing business or that the second example would not, since they are both in the gray area, but you can see that the slight difference in facts does change the shading of gray.

Evan
09-19-2009, 02:20 PM
To expand on David's comments: some states will also require you to register to do business with them if you are in the state for greater than a certain number of days. Say you do business for 2 months, some states will say you are doing business in the state and need to register. (In this case, it'd be registering as a foreign LLC, paying any necessary taxes, and also obtaining all of the proper licenses which may be required.)

State taxes can become quite complex, because if you are subjected to income tax in another state, income and expenses are usually allocated based on a percentage of income, or even assets.