Discussion:Forming an LLC Out-of-State

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Discussion Forum Index --> Consumer Questions --> Forming an LLC Out-of-State


MrCodeDude (talk|edits) said:

12 September 2006
I run a website that has gained national publicity and I know that I must form an LLC soon to prevent my personal assets from being at risk if my website gets sued.

I am located in California, my partner is located in Wisconsin. We’re looking at incorporating in Nevada, because they seem to be a very pro-business state: no franchise tax, the privacy veil, meetings not having to be conducted in-state, etc. We have no offices and both of us work out of our apartments. Our main source of income is through advertisers (located all over the country).

1. I know I need a Registered Agent so that I can incorporate in Nevada, but will I have to file as a foreign LLC doing business in Wisconsin and California because that is where my partner and I work from? And if so, where can I find the associated fees for being a foreign business in California and Wisconsin? If we hired another employee, would we be "doing business" there too?

2. Will we need to get a bank account in the state of Nevada or can we get a bank account in either of our home states? I assume if we used a national bank, it wouldn't matter where we accessed the account. Is this a wrong assumption?

3. Since the LLC will be taxed as a pass-through entity (as a partnership), we’ll both be paying income taxes to our home state; and since there is no franchise tax in Nevada, are these the only taxes we will be paying?

As far as I understood, "doing business" in a state would require a storefront or an office building; we both run the website on the side (both of us are college students), so we don't even have home offices.

BottomLine (talk|edits) said:

12 September 2006
Sounds like you've been listening to the advertisements about "incorporating in Nevada". I'd suggest paying for a 1-2 hour meeting with a California or Wisconsin CPA. Have a list of questions prepared beforehand.

Dennis (talk|edits) said:

12 September 2006
I vote for California and Wisconsin nexus. ♫

JR1 (talk|edits) said:

September 12, 2006
You'll end up registering in both CA and WI, as well as NV, increasing costs and aggravations rather than decreasing them.

Death&Taxes (talk|edits) said:

12 September 2006
How many times have I heard a client tell me they incorporated or formed a Delaware LLC and only then learn they must register to operate in New Jersey or Pennsylvania? So glad to hear others give the same advice.

JRE (talk|edits) said:

12 September 2006
I have a meeting with a potential new CA client today that was SHOCKED to find out that will have a CA filing requirement. They cannot understand how the LLC they formed in WI will have a CA filing requirement.

Sandysea (talk|edits) said:

12 September 2006
INFURIATING!!! If you have nexus in a state, like Dennis said, and others as well, then that state is entitled (and will look for) income from that business. When you try to explain this to clients, they don't want to hear it....anyway to keep from paying taxes. Why don't we ALL incorporate in Delaware since there are no taxes?

I will forever be amazed that people try everything they can to keep from paying ANY taxes, yet the successful businesses are the ones who appreciate tax AVOIDANCE and not tax EVASION.

On a roll again today, can you tell? hehe

Death&Taxes (talk|edits) said:

13 September 2006
You know what the real killer is, don't you, Sandy? It's comes after they set up in Delaware and then call you to ask how they get a Pennsylvania Sales Tax Resale certificate to avoid paying that tax on purchases!

BottomLine (talk|edits) said:

13 September 2006
Talking about crazy nexus - I do sub work for a CPA that has some professional baseball players as clients. He has to get their schedules to figure out how many days they were in different states so he can do their tax returns. Talk about high tax prep fees!!

Death&Taxes (talk|edits) said:

13 September 2006
I have three clients who accompany MLB teams in support positions: you cannot e-file their returns because their W-2, blocks 16-17, has too many states listed, as many as eight. One poor man who lives in a state without income tax still must file in CA, AZ, MO, MN, IL, OH, MD, MA and NY. Ask your friend about MLBPA royalties and the letter that comes with them.....they will pay X in royalties, deduct administrative fees plus other fees that they call union dues. Naturally for these 'low-paid' employees, these union dues are wasted by AMT, BUT every five years or so, about 80% of these dues are refunded to them, so that if you handled the deduction as dues, you must rework the old returns to find out the tax benefit of those dues.

MrCodeDude (talk|edits) said:

13 September 2006
I talked to a CPA and he echoed what has already been said here. However, he didn't touch much on the Wisconsin/California nexus part because he said he's only involved in California businesses.

My partner is in Wisconsin, I am in California. Is there a cheaper way of going about this (incorporating in Wisconsin, foreign in California / vice-versa)? The $800 annual franchise fee is a lot of money for a small company like mine.

JR1 (talk|edits) said:

September 13, 2006
You'll have nexus in both, and so therefore registering and filing taxes in both. I'd research to see which way is easiest/cheapest...org'ing in CA or WI, and then foreign registry in the other. Legalities have some importance here, as I've read a few posts that CA does not treat LLC's as do most other states in terms of really limiting liability. Your partner needs to find attorney and accountant in WI, and you the same in CA, and get into their offices for a group conference call. Spending 500-1000 for that hour and all those pro's should pay off big time later.

JR1 (talk|edits) said:

September 13, 2006
OR! Why do you have to run this as one company? Maybe you have yours, he has his...and you can avoid a lot of headaches for a while anyway, until the biz's grow to the point where it makes sense to combine and pay all the freight for that.

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