| 7:23 pm on Aug 20, 2008 (gmt 0)|
There are probably far more Delaware-registered companies that are phsically not in Delaware than there are companies in Delaware. I will PM you the company I've been using.
Regardless of where you form your company, you still have to pay CA taxes. Including the annual $800 franchise tax. Plus you have to pay the annual franchise taxes in Delaware (which have gone up quite a bit, as I was just informed 2 days ago :( ). That's something most people neglect to mention when they tout the benefits of registering a company in Delaware.
| 7:36 pm on Aug 20, 2008 (gmt 0)|
Thank you for the really quick reply. I'm wondering, since I just moved from Illinois and my father (who oddly enough has the same name as me) is still registered as a resident in Illinois, would it behoove me to report all taxes as a resident of Illinois? I would have no qualms about "sharing" the business with him in order to do this; I'm mainly concerned about mitigating California's lovely taxes. If you do not recommend this, since I'm already going to have to pay the California franchise tax, should I just form the LLC in California? Or would that yield even more taxation?
Thank you again!
| 7:57 pm on Aug 20, 2008 (gmt 0)|
Welcome to WebmasterWorld daisukepr!
I might suggest discussing this with an accountant. That whole Delaware thing is so 90s. :)
If you are doing business in California, don't try to avoid the taxes. We'll send the Terminator out to get you. ;)
| 8:19 pm on Aug 20, 2008 (gmt 0)|
Don't worry about sending the terminator. I brought my savings here from Illinois and have been squandering it all with the incredible sales tax and ultra high real estate costs.
In an effort of cutting down consultation costs, would you recommend talking to a lawyer or an accountant first?
| 8:22 pm on Aug 20, 2008 (gmt 0)|
Cheers back at ya!
|In an effort of cutting down consultation costs, would you recommend talking to a lawyer or an accountant first? |
Actually both in sync. If you have your business set up already, avoid the lawyer. Your CPA would be the best source of information. Or an Accountant. I see them as separate entities. Lawyers, CPAs, Accountants. When it comes to hard core taxes, I call my CPA. When it comes to day to day management, I talk with my Accountant. When someone messes with me, I talk to my Lawyer first and then my Accountant. And then my CPA shakes his head. ;)
| 8:24 pm on Aug 20, 2008 (gmt 0)|
|We'll send the Terminator out to get you. ;) |
Yeah, and he'll have lots of free time on his hands while the rest of the family is at the Democratic National Convention. :)
And yes, definitely discuss with an accountant. It depends on your business, but if you have any type of real presence in CA (are you shipping products from CA? does the busieses have a CA bank account?), they will decide that you are actually a California business.
| 8:33 pm on Aug 20, 2008 (gmt 0)|
Pageone: I don't have a business set up yet. I've been meticulously working on a detailed business plan to ensure I am prepared before launching. In order to get a proper wholesaler of the product I'm looking to handle, I need to be an established business. The irony is that in order to become an established business, I need to understand my operating costs (including how much the wholesaler would charge for the product), so that I can make a proper business plan to become a business. I imagine that once I get started, there won't be much overhead as it'll be a website and I'll handle shipping/receiving from home at first.
Any idea on how much lawyers, CPAs, and accountants charge to get started? Should I just look in the yellow pages or google to find local ones?
LifeinAsia: Yes, I will be shipping and receiving product in CA, so I presume that would make me a CA business. I guess that kinda clarifies it. Is there any advantage to becoming a Delaware LLC instead of a Cali one at this point? Or is that a question best asked of a lawyer?
Thank you both again for your help. You've already provided me with a wealth of information!
| 8:37 pm on Aug 20, 2008 (gmt 0)|
I was able to start my business with less than $2,000. I contacted a Corporation Attorney here in California, a local one, and met with him in their office. I set up a Sole Proprietor LLC. I'm taking baby steps. I officially became a business in 2005 January.
I'm also expanding out and have developed /d/b/a/'s under the LLC. I go through me attorney each time, doesn't cost much. Get's all the paperwork in order and we're done with it.
Keep in mind, that whichever method you choose, there are a few that don't allow you to "go back" or "redo". The LLC option is perfect if you want to start small and then expand out from there. You can always "Inc." at a later date. No need to make the commitment initially unless it is a necessary part of your business plan moving forward. For a sole proprietor, working from home, I feel the LLC option is the best starting point and the least expensive to maintain.
| 8:59 pm on Aug 20, 2008 (gmt 0)|
I've been calling around for incorporation lawyers and had one tell me he's too busy to do me justice (at least he was honest). I found someone who says he'll take care of everything for $1200, which includes filing all paperwork with the state, county, federal, and resale permits.
Strangely, he suggested an S-Corp as he says LLCs have the negative stereotype of being unprofitable. In spite of the fact that I do not anticipate turning a profit for a little while, he seems to think it is the best bet. I'm a bit of the skeptic type and wonder why he would suggest that. Any ideas?
| 9:40 pm on Aug 20, 2008 (gmt 0)|
A lot of the companies that will file the paperwork for you to register a Delaware business can do the same in other states. (I just checked- it looks like the one I PMed you does not.)
I also agree with POR that an LLC is probably the best best when starting out, but again, you probably want to consult with professionals in the legal/tax fields who will have a better understanding of your situation than we do.
For the record, I started out as a C corp (wouldn't have qualified for an S corp and at the time felt an LLC didn't sound professional enough). It was a lot less than $1200. Granted, it was 8 years ago, we don't sell products (which eliminates some paperwork), didn't have any employees (again, less paperwork), and didn't have a presence in the U.S. until later.
One other issue to muddle the waters... I assume you're planning to accept credit cards in the future for your business? For some industries and some merchant account providers, running an online LLC out of your home, especially when you are first starting out, gives you 4 red flags and makes you look like too much of a risk to approve. Would being a Corp instead of an LLC make any difference? It might. At the time we started processign credit cards, I got the distinct impression that we would never have been approved if we were an LLC. Again, that was several years ago, but the finance industry has also been tightening policies over the past year.
| 9:55 pm on Aug 20, 2008 (gmt 0)|
|I got the distinct impression that we would never have been approved if we were an LLC. |
Wow, I haven't found any of that stigma to date. In fact, I can't get the bank to stop raising me damn credit limits. I have to call them and physically request that they stop.
Man, mention LLC around here and ya think we were talking bad neighborhoods or something. Is there that much of a stigma? If so, I'll change over to a Corp. Everything appears to be running smoothly as an LLC coming up on 4 years. ;)
Yes, there have been some questions when doing banking. The tellers didn't understand what a Sole Proprietor LLC was when I was depositing checks for /d/b/a/'s. That was about the only thing I've run into. It's new to many of them even after all this time.
| 12:03 am on Aug 21, 2008 (gmt 0)|
Like I said, it was several years ago, and it may have just been related to our industry. I know there are certianly a lot of LLC-out-of-home startups (in other industries) that can process credit cards, so it's not a death sentence. :)
| 3:10 am on Aug 21, 2008 (gmt 0)|
LifeinAsia: I will be processing credit cards, will (re)sell products, and will probably secure a loan to help cover some startup costs. I'll keep in mind what you said and ask some lawyers and accountants as well.
POR: Out of curiosity, did you start your business as an LLC? Did you take out any loans?
Is there any distinct advantage of filing as an LLC over an S Corp?
I really do appreciate all the help you have both given me.
| 3:50 am on Aug 21, 2008 (gmt 0)|
|POR: Out of curiosity, did you start your business as an LLC? Did you take out any loans? |
Yes, started as an LLC. Actually, I started as an individual under unique circumstances and then formed an LLC after many years of working under the "individual" scenario.
No loans. I did get a line of credit immediately. I prefer not to use credit too much, once bitten twice shy type of thing. Cash only in most instances. :)
| 4:58 am on Aug 21, 2008 (gmt 0)|
I wonder if you didn't encounter any problems with having an LLC because you did not seek out any loans at the beginning.
I'll call around to some accountants tomorrow morning. Would any accountant do or is there a specific kind I should be looking for to help with company formation based financial advice?
| 6:17 am on Aug 21, 2008 (gmt 0)|
I have an LLC and S Corp. My personal 2 cents would be to go LLC due to tax benefits. It adds up quickly.