Listing a Principal Place of Business for Taxes

Ronnie Gift
Principal Place of Business

If you are a sole proprietor or a single-location business, your principal place of business is your home, office, shop, or wherever you typically operate your business.

However, big businesses and corporations usually have several sites nationwide or even globally.

This article will discuss the principal place of business necessities. The primary location of a business is essential to understand since a business owner who is based on the principal location of a business can permit specific deductions.

What is Your Principal Place of Business?

Your principal place of business is your house or workplace or wherever you typically perform business.

Large corporations usually have several sites nationwide or even globally. In these instances, the company’s headquarters is typically the principal place of business. It is not always the same state as the state of incorporation.

Why is the Principal Place of Business important?

The principal place of business is crucial in the IRS and litigation. If a plaintiff lives in a different state from the defendant, who is a company, and the plaintiff files a lawsuit against the defendant.

In this scenario, what’s known as ‘diversity in citizenship’ could impact the courts in the lawsuit could be filed.

If there’s a diversity of citizenship and the dispute is a certain amount. In that scenario, the case could be brought in Federal court instead of a state court.

Even though an order from the Supreme Court clarifies the definition of the principal place of business, the definition could occasionally be more complicated than described in the previous paragraphs.

There are instances when an officer can wear many different hats and be a part of the subsidiary corporation and the parent company simultaneously, and therefore controls and oversees corporate operations from several states, which may cause confusion between the primary office.

Tax Benefits

The Internal revenue service (IRS)is highly interested in the location you consider your principal place of business since this is typically where your books and records are kept.

Additionally, it allows business owners to claim certain deductions based on their principal place of business. Businesses must typically declare their primary office with the Secretary of State. For home-based businesses, it can be a bit more complicated.

Suppose you’re a home worker or use your home as an operational base for contracting companies such as roofing or landscaping. In that case, it is essential to show that your residence is your primary place of business.

Where Can I use as a Principal Place of Business?

Home office

If your company has three locations, you do most of its administrative and management tasks at your home, like accounting, scheduling, and management tasks.

 In this scenario, you can deduct some of your tax. Knowing if your home office is exclusively used to conduct business is essential.

 You may reduce some of the expenses associated with maintaining your home, like mortgage interest, insurance taxes on real estate repair, and utilities.

The most crucial factor to consider when determining the principal location of your business is to determine where the majority of the management or administrative operations are conducted. You can take home office deductions if you need a fixed place to perform significant administrative or management functions.

Special considerations

The IRS has specific rules for individuals conducting business while on the move or away from their residence for an extended period.

 For instance, if you perform administrative or management tasks from a hotel room or even your car, it will not necessarily mean you aren’t taking the deduction. You should only hire an outside service, for example, bookkeepers, to do these functions outside your home.

There are additional tests and conditions associated with the deduction you’ll need to discuss with a qualified tax professional before deciding whether you’re eligible to claim this deduction.

Other deductions which could be affected by the central location of work include travel expenses. Specific rules regarding the distance between your work locations and the location of your “tax home” can affect the deductibility of certain expenses.

Virtual office

Virtual offices are a service that allows employees to work remotely, offering various essential services for businesses via the internet, including the mailing address, telephone number, and workplace space available to rent at a cost-per-use basis. 

Since virtual offices can provide your company with a physical location, it’s fair to ask whether it can be used as your primary location of business.

But, since most businesses don’t conduct business operations from the premises offered via the virtual workplace, it must be clear that more than a virtual office is needed to be a principal place of business.

 People who work out of an office virtually are better off registering their address at home as their principal place of business. Back to top

Registration office

An office is registered as the physical space where all of a company’s legal documents are maintained, and any legal process can be served (i.e., summons from the court). 

The law states that the registered office must be situated in the same state where the business has been registered and be represented by an authorized representative present during business hours to accept paperwork for the company.

The registered office could be the primary office, though it isn’t required. One example of a registered office that also functions as an important business location is a shopfront where legal documents are maintained and where managers work, and business is carried out daily.


The principal place for your business is your home, office, or where you usually conduct business.

But, big corporations typically have multiple sites across the nation or even worldwide. In such cases, the headquarters of the business is usually the primary location of its business. This is sometimes different from the state of incorporation.

Knowing the requirements for a principal place of business is essential to scale.

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