I own several websites and am looking for the best corporate structure and state to register in. I am currently registered as an S corp but the only employees are my business partner and me. My business partner lives in the state of Washington and I spend time in different states and countries. We could work from anywhere so we don't need an office. I've spoken with accountants but they don't seem to have any experience with internet businesses. I've heard good things about Delaware and would like to avoid a state business tax. Any advice? Thanks.
Go offshore... Hong Kong or Singapore is likely best (depends though on your services) and for a few $K a year you get an accountant to boot.
Interesting, have you tried offshore? I know it won't affect my individual taxes but it might avoid the FICA from the business. Does anybody have experience registering an internet company? Thanks for the help.
Can't you circumvent the FICA just by channeling, say an LLC company profits into share dividends rather than income from an S Corp? I mean if you buy shares in GM you don't have to pay FICA on anual dividends do you? I don't own any shares but I am assuming you do not.
When setting up a non-resident company in another country - your company banks and follows the tax laws of that country and not that of the country you do most of your business in. You need an agent (which is a local director) to apply for registration - most of which are certified CA. Dubai is another attractive country most suited for a virtual enterprise (a little more costly to setup).
Regardless of what state you incorporate in, you still have to declare one state as your tax home. Delaware does charge tax if you incorporate there and also use them as a tax home. Nevada does not. However, since you are an S Corp, your corporation doesn't pay any tax, so it will all pass through to you and your partner at whatever state you have registered as your tax home. Normally this would be the state where you have a mailing address, drivers license, etc.
So is there any way to avoid double taxation on an internet company? Nevada LLC well suited to this or an out of the US offshore company in Dubai or Caymans or Panama even better? What are people doing about this...if a person makes more than 10k a year is it still worth it to set up corp structures that minimize tax and civil suits liability?
LLCs and S Corporations are pass through entities. That means they pay no taxes themselves. I believe there were some recent changes to tax law that do away with many of the double taxation issues, but you'd have to check. I think the law now says that if a corporation already paid tax on money, you don't have to pay tax on it when it is distributed as a dividend. You'd have to check to make sure. If you are only making 10k per year, it is not going to be worth going off-shore (unless you happen to live in one of those places already). However, it is still worth incorporating because it will allow you to claim some deductions that you couldn't otherwise. It will also let you transfer some of your money into your pocket as passive income which will save you about 15% in FICA taxes. Of course one of the biggest issues is lawsuits. If you are in an area where you might get sued, having a corporation can prevent you from going bankrupt if you have a lawsuit.