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Best Way to Setup an Online Business? LLC, Sole Prop, ETC

Discussion in 'Legal Issues' started by StocksonWallStreet.net, Feb 23, 2013.

  1. #1
    What's the best way to setup an online business? Do I got with an LLC, Sole Prop, what? Also where do I register it, what state? I live in California but is it possible for me to register in Nevada and pay for a PO Box so that way we can avoid CA Income Taxes or do I actually have to live in the place it's registered. Thanks!

    My website is: http://stocksonwallstreet.net
    SEMrush
     
    StocksonWallStreet.net, Feb 23, 2013 IP
    SEMrush
  2. MockOutrage

    MockOutrage Peon

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    #2
    Google "LLC asset protection" for some good details on the benefits of LLCs.

    As for the tax implications of Nevada addresses, that's a good question for a tax attorney or CPA. I've seen it tried before, but a PO Box may not be sufficient; you may need a physical business address. There are shared resources like virtual offices which will give legitimacy to your business, but tread carefully. There's a world of difference between tax planning /strategy vs. tax avoidance. Usually involves fines and/or handcuffs.

    The big dogs all run their money through Ireland these days to minimize corporate taxes.

    -MockOutrage
     
    MockOutrage, Feb 25, 2013 IP
  3. Detox78

    Detox78 Peon

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    #3
    To incorporate in CA it costs $800 the top states to incorporate that I know of are: Delaware, Nevada, and Wyoming.

    You MUST have a PHYSICAL presence in that state, meaning you will have to hire a representative to stand in behalf of your company in a court of a law. For your purpose of "tax avoidance" it is formally illegal to do so, the IRS will give you the time of your life if they find out. What you can do however is consult with an accountant in order to legally find loopholes in order to pay less tax.

    Concerning the "big dogs" their brand of tax strategy involves the use of their subsidiaries, multinationals, and transfer pricing in countries such as Luxembourg where there is no corporate tax. I personally think you should let that idea go until you have to move to wall street.
     
    Detox78, Feb 25, 2013 IP
  4. Business Attorney

    Business Attorney Active Member

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    #4
    Actually, whether the OP has a California entity or a Nevada entity is irrelevant to the IRS. For federal tax purposes (which is all the IRS is concerned with), the state in which the entity is located doesn't affect the IRS getting its share.

    California will care, however. Although the residence of the shareholders of a corporation doesn't generally affect the allocation of the corporation's income among the various states where it conducts business, the residence of an owner of a pass-through entity (such as an LLC or S corp) is relevant.

    In addition, while the state of residence of the owner of a corporation is not directly relevant, if the owner is conducting the corporation's business from his residence, then the corporation is probably doing business in that state for purposes of allocating income among the states.

    This is a complicated area of the law and you should consult a tax lawyer or accountant before making a decision.
     
    Business Attorney, Feb 25, 2013 IP
  5. oneclickfixed

    oneclickfixed Well-Known Member

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    Whatever you do, I would stay out of CA. They have the most aggressive, and oppressive tax department.
     
    oneclickfixed, Feb 26, 2013 IP
  6. brandama

    brandama Member

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    #6
    Yeah, I live in California. The government, politicians, rules, stupid people, & regulations here suck. But I love the weather and terrain and all the family that lives here. Incorporating out of state is a bad idea. Stay a sole proprietorship as long as you can.

    -brandama
     
    brandama, Mar 8, 2013 IP
  7. gzed

    gzed Active Member

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    #7
    Residence alone is enough to create a tax nexus. They could pull your atm receipts / phone records and that would be enough to prove nexus, regardless of where you earn your money (for example, if you logged into a virtual server out of state to conduct internet business in an effort to avoid your local state's corporate taxes).
     
    gzed, Mar 12, 2013 IP
  8. brandama

    brandama Member

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    #8
    @gzed, it can be done, but it is more complicated than that. It involves setting up multiple companies, one to manage the income producing business and one for the income producing business, not worth it unless it is a million dollar company. And it involves many other strict rules.
     
    brandama, Mar 19, 2013 IP
  9. Feriscool

    Feriscool Greenhorn

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    #9
    LLC for sure.
     
    Feriscool, Mar 22, 2013 IP