Forum Moderators: LifeinAsia
I'm looking to form an LLC to "own" a new website/business that I'm looking to create. This is mainly to protect my personal assets and aid in tax reporting.
From everything that I've read and heard, Delaware is the key place to do it in. Unfortunately (or fortunately, depending on how you look at it), I am living in California, not Delaware. I know that you can file without ever setting foot in Delaware, through a registered agent; however, I do not know which websites that offer this service are legitimate.
Does anyone have any recommendations? I'm trying to do this with as little money as possible, but I will "splurge" to do it right.
As an aside, if I form the LLC in Delaware and do business via the website to all states (and possibly internationally, though most likely not), do I have to pay any sort of taxes or fees in California, my legal residence?
Cheers in advance for all of your help!
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.
Thank you again!
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. ;)
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?
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. ;)
We'll send the Terminator out to get you. ;)
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.
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!
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.
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?
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.
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.
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.
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. :)
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?
