Can My 2-Member LLC with No Employees or Physical Presence Have No Nexus?

A managing member of a 2-member LLC formed in Delaware asked whether the LLC can have no nexus: they reside in Illinois and work from a home office, the LLC has no employees, no storefronts, no inventory, and no affiliates in any state (tech company), and there is no income yet. Their understanding is that their home office does not create physical nexus because they are not an employee. They are considering no registration and no state income tax filings for now and expect to handle sales tax in some states later. Yes, it is possible that your 2-member LLC has no nexus in many states if you have no physical presence (no offices, employees, or inventory) and no economic nexus (no sales). One important caveat: some states treat a member or partner working from home in the state as creating nexus for the LLC, so Illinois (and Delaware) rules should be confirmed. Once you have revenue or activities that establish presence, you may need to register and file.

Bottom line: Yes. It is possible that your 2-member LLC has no nexus if you have no physical presence (no offices, employees, or inventory in any state) and no economic nexus (no sales or below state thresholds). Operating from your home office in Illinois with no income yet may not create a sufficient connection in some states, but some states do treat a member or partner working from home as creating nexus for the entity, so confirm Illinois and Delaware. For now, no registration and no state income tax filings may be correct; monitor activities and revenue and plan for sales tax registration and state filings once you have nexus.

Question from Reddit

Can my 2-member LLC with no employees or "physical presence" have no nexus?

I'm a managing member of a 2-member LLC. We are formed in Delaware, and I reside in IL. I work from my home office. We have no employees and no storefronts, inventory, or affiliates in any state (we're a tech company). We also have no income yet.

My understanding is that my home office doesn't create "physical nexus" because I'm not an "employee." Is it possible that we have no nexus? In the future we expect to have sales tax obligations in some states and will need to register, but for now I'm thinking no registration and no state income tax filings. Am I missing something?

Source: Reddit

Analysis

The user wants to know whether their 2-member LLC can have no nexus for state income tax and sales tax so that they need no registration and no state filings for now. Nexus is the level of connection a business must have with a state for that state to impose tax obligations. The main types are physical presence (office, employees, property in the state) and economic nexus (e.g., sales or transaction thresholds). The user has no employees, no storefronts, no inventory, and no income; they work from home in Illinois and wonder whether the home office counts as physical presence. The answer depends on state-by-state rules: many states look at physical presence and economic nexus; some states also treat a member or partner working from home in the state as creating nexus for the entity, which the user should confirm for Illinois and Delaware.

Answer

Yes, it is possible that your 2-member LLC has no nexus in many states in your current situation.

When you may have no nexus

Physical presence usually means things like an office, employees, warehouse, or inventory in the state. If your LLC has no employees, no storefronts, no inventory, and no affiliates in any state, you may have no physical presence in states other than where members work or the entity is formed.
Economic nexus (for sales tax) is typically based on sales or transaction counts into a state (e.g., over $100,000 in sales or 200 transactions per year in that state). With no income yet, you are below economic nexus thresholds everywhere.
So for now, no registration and no state income tax filings can be correct if no state treats your LLC as having nexus.

Caveat: member working from home

Some states take the position that a member or partner working from home in the state creates physical presence (nexus) for the entity. In that case, the LLC could have nexus in Illinois (and possibly in Delaware as the state of formation) even with no employees. Your view that "I'm not an employee so my home office doesn't create nexus" is not always accepted; state rules differ.
Recommendation: Confirm Illinois and Delaware rules for an LLC with a member working from home and no other presence. A tax professional familiar with state and local tax (SALT) or Illinois/Delaware entity tax can give you a definitive answer so you are not missing a filing or registration requirement.

Once you have income or presence

When you generate revenue or engage in activities that establish physical or economic nexus in a state, you may need to register for sales tax and file state income tax (or other state returns) as required. Monitor sales by state and where members and any future employees work so you can register and file when nexus is triggered.

Applicable Sections

Federal / IRS

Nexus for state income and sales tax is determined under state law, not a single federal rule. The IRS does not define nexus for state purposes; states use physical presence, economic nexus, or other criteria.

State

Illinois and Delaware each have their own rules for when an LLC has nexus for income tax and sales tax. Some states treat a member or partner working from home in the state as creating nexus for the entity. Check the Illinois Department of Revenue and Delaware Division of Revenue (or a state tax professional) for your situation.

Practical Notes

No employees, no storefronts, no inventory, no income: You may have no nexus in many states for now, but confirm whether Illinois (and Delaware) treat a member working from home as creating nexus.
Monitor business activities and sales by state. Once you have revenue or presence that triggers nexus, plan for sales tax registration and state income tax (or other) filings.
Keep records of where the LLC operates and where members work so you can reassess nexus as the business grows.
Margen can help you model business income and tax; for nexus and state compliance, use state resources or a SALT or state tax professional.

Limitations

This answer does not cover every state's nexus rules or local taxes. State law and agency positions (including on member/partner presence) vary and change. For your LLC and Illinois and Delaware specifically, consult a tax professional familiar with state and entity tax. You can use Margen to model income and tax; for nexus and registration, rely on state guidance or a SALT pro.

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Can My 2-Member LLC with No Employees or Physical Presence Have No Nexus? (Reddit Q&A)