Forums: Discussions for entrepreneurs and small business.

Hi All, just wondering how the taxation for an LLC would work.  I am a California resident and my objective is to pay as little taxes as possible (legally) with a new dotcom business.   It will only be virtual, so I am thinking about starting a Nevada LLC instead of a California LLC as Nevada does NOT have state taxes.  From what I understand CA and NV LLCs both require you to pay federal income tax on whatever profits/losses acquired by the LLC on your personal federal income tax return (unless you choose to be taxed as a corporation at the higher corporate tax rate).  So, I was thinking because I am virtual, I can start up the dotcom, form LLC in NV and will NOT have to file as doing business in any other state. 

Although, my server(s) will be located in various places throughout the country, but that doesn`t have an affect on my taxation requirements right?  

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Dislexics are teople poo...
There are 10 kinds of people. Those who speak binary and those who can`t.

hmmm.... I think I might have posted this in the wrong place... lol

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Dislexics are teople poo...
There are 10 kinds of people. Those who speak binary and those who can`t.

In general, CA wants your money. So if you have a " business presence" in CA you will pay CA taxes.  Your business presence can be defined as where you get your business mail and where your business bank account is located.

I live near the CA/Nevada border and I do know some people who live in CA and  have Nevada Corps and LLC`s and manage to avoid a  CA business presence, but you have to be very careful!

Kathleen

 

Correct, if you locate your business in Nevada, you would not have to pay state sales taxes, as long as you don`t have a "physical presence" anywhere else. And no, where your hosting company is located does not create a physical presence in a state.

Also, you`re correct that you`ll be paying Federal income tax for your LLC regardless of where it`s located.


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Accounting Made Simple | Sole Proprietor Tax Guide

Ah, the tax game.
One thing to consider here is that as a resident of CA you still have the income tax to pay on your personal income. So, (in short), wherever your LLC in located at  you will have to pay state income tax on, because as you stated your filings are on your personal tax returns.

You might look into the advantages and requirements of setting up the S-Corp in Nevada, as that would be the next stage for separating your personal income form business income.






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Er, correct me if I`m wrong, but forming an S-Corp won`t do much for separating personal income from business income will it? (Being located in Chicago, I don`t deal frequently with CA income tax, so there could be some California specifics that I`m missing here.)

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Accounting Made Simple | Sole Proprietor Tax Guide

Well, I guess I can choose to have the LLC taxed as a Corporation instead of putting it down on my personal income tax.  But, then I`d have to pay the higher corporate tax on the LLC and personal income tax on what the LLC pays me... but that`s probably gonna save little to none... lol.  I guess CFOtoGo is right... they`re gonna get my money regardless - so, I should just register the LLC in cali. 

In terms of business presence...  I was planning on possibly renting an executive suite to establish a nevada address registered to the LLC and get a bank in nevada for my account... then I would be the only employee, but I guess, I can setup another LLC or DBA and pay for software development services to a "3rd party" instead of an employee.  Since hosting in a certain state doesn`t establish presence in that state I thought I could maintain presence only in Nevada. Does having an employee in Cali establish presence? Bottom line is that I think there really isn`t much of a way around this. 

I hate that california taxes what your LLC makes even if you don`t pay yourself the money (leaving it in the LLCs bank account but choosing to pay taxes on my personal income)....   Thanks for all your help guys!  If you have any computer questions I`ll be sure to get one of `em ;)

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Dislexics are teople poo...
There are 10 kinds of people. Those who speak binary and those who can`t.