Where should I Incorporate?

foneguy9foneguy9 subscriber Posts: 2
edited November 2007 in Business Planning
I`m confused Well maybe not that much, but I was looking at LLC for new company and wondering if I am selling computer parts, hopefully nationwide, should I incorporate in Nevada?  I will have a SOHO in California and may be moving to Utah in a few months.  I will possibly be traveling to other states as well but I won`t have a `physical` location.  Primarily, Web site and I guess Registered agent in Nevada.  Would people buying products online need to pay sales tax?  How about the services that I provide to clients?  How would that work if I provided telecom services in muliple states?  Hope you can push me into the right thought process....

Comments

  • foneguy9foneguy9 subscriber Posts: 2
    Thanks Laura for that reply and Link!!!
    I am scouring that web site on another browser tab and post any update as well for anyone else that may have a similar concern.
  • PiperTaxPiperTax subscriber Posts: 5
    Hi foneguy. First, your statement "I was looking at LLC for new company and wondering if I am selling
    computer parts, hopefully nationwide, should I incorporate in Nevada?" has me concerned. Before forming an LLC, make sure you understand the differences between an LLC and a corporation. If you form an LLC, you are not incorporating.This article on my site covers the topic of state sales taxes and when you`d have to remit them to a state.
  • foneguy9foneguy9 subscriber Posts: 2
    Thanks Piper!!!
    Your site is very good!  I am even looking at Amazon for your book!  Looks easy to understand.  
    As to the LLC, can I specify that it is an S-Corp status?  Would this help at all in taxes? 
    Your site about Online taxes, interstate and intrastate is great!  In my case, If I am a resident of California now, but in less that 6 months I will be a resident of Utah, how exactly do I look at my Online sales intrastate taxes?  If someone in California purchased widgets on my site, should I be including Sales tax for the first 6 months then not at all for that same client after 6 months? 
    I understood it this way, but am asking for clarification!
  • PiperTaxPiperTax subscriber Posts: 5
    Foneguy, that`s my understanding of how it would work. For the first 6 months your business would be located in California, so you`d collect (and remit) sales tax on intrastate sales there. Then for the next 6 months you`d collect and remit sales tax on intrastate sales in Utah.
    Depending upon how much you`re making, it`s possible that electing S-Corp status would save you some money. (What it will definitely do though is increase your accounting fees, so be sure that what you`d be gaining will at least offset what you`d be losing.) This article from my site may help with the entity selection issue. (It`s covered in my detail in my book as well.)
  • Jaun22Jaun22 subscriber Posts: 0
    Thats for that article. I was in a similar situation and found it to be very helpful.
  • foneguy9foneguy9 subscriber Posts: 2
    Hi Piper,
    I just ordered your book from Amazon and hopefully will get it next week!
    Then, as to forming the LLC, if I form it in Nevada or Utah, I would still need to be setup in California as a foreign Corporation for doing business in California and pay the $800.00 `just for existing` tax?
    If this is the case, would it make a difference forming the LLC in California then since I expect much of my widgets will be sold in California?
    For the retainer contract/agreement with my former employer, that would be @ $61,000 for an 11 month term.  I will likely have this same agreement for one more term after this first one expires, with the same company.
    I am estimating about $5000.00 a month in expenses including my salary.  Would the `extra` hassle/charge of accounting fees for an  LLC setup as an S-Corp be worth it?foneguy911/9/2007 5:06 PM
  • PiperTaxPiperTax subscriber Posts: 5
    Thanks for buying my book Foneguy.
    Generally, an S-Corp is only going to save you money as a result of one thing: S-Corp profits are not subject to Self-Employment Tax.
    However, before "profits" get calculated, you`re required to pay yourself a "reasonable salary." (And the salary would of course be subject to social security and medicare taxes, which, in total, will be the equivalent of the self-employment tax.)
    What that all means:

    Figure out what the typical salary is for somebody in your position if they were an employee doing the same type of work that you do. (Try salary.com)
    Then figure out how much you would earn (net of expenses) through your business doing the same work.
    Subtract the answer to #1 from the answer to #2. The difference is how much the S-Corp "profit" would be. Multiply this profit by 15%, and you get a rough estimate of how much you`d be saving per year on self-employment tax.
    Compare that savings to the extra you`d be paying in fees. (You`ll have to do some shopping around to determine the amount of accounting/legal fees you`d be paying.)PiperTax2007-11-9 17:9:0
  • foneguy9foneguy9 subscriber Posts: 2
    That was a Quick Reply!
    For point 1, would that be calculated as an hourly rate?  I will not be working a 40 hours a week, the contract specifies 90 hours a month, so that`s about 22 1/2 hours a week.  Would I take the median $75,000 a year and break that down to hours?  Is this the translation I am looking at?  Then bring it back to annual?
    As to point 2, that number is coming in at $19,500 a year. 
    Also, will it matter what state I form the LLC, then, as regards to interstate tax?
  • PiperTaxPiperTax subscriber Posts: 5
    Yeah, you`d certainly want to adjust it so that you`re making an apples to apples comparison. So if that means working it out by hour, that`s how I`d do it.
    Generally the easiest thing to do is just form the LLC in your own state. The advantages to be gained by doing it any other way are generally pretty minimal.
  • foneguy9foneguy9 subscriber Posts: 2
    Hi PiperTax!
    Wanted to let you know I have read your book a couple of times already!!!!
    Doesn`t mean I`m an expert as I can tell by what your book is presenting, but gives me a good grasp of the small business sole- proprietor or S-Corp or LLC question.  Basically, the answer to my question of this post is a resounding, Depends!
    A need for clarification came up...
    Can health insurance be deducted as an S-Corp or an LLC?  Is there limitations on each? (Chapter 5)
    For an LLC, does your example of an electrician who has an LLC and after doing some work on a clients` home, and their house burns down, will liability be his for both business and personal assets in a lawsuit?  The Limited Liability part of an LLC won`t protect his personal assets?
    (Chapter 17, Page 86 and 89)
    Can the profits from an S-Corp remain in the company accounts without having any SE or other taxes?  That is, regardless of the S-corp status as a pass-through entity.  Would there be a different answer to that question for an LLC?
    Oh, and why can`t a Schedule just be called what it is... a form!  Sheesh... only makes it more complicated when simple things are obfuscated!!!!  I only have so much in brain cycles!
    Thanks all for your kind and patient attention!!!!foneguy911/21/2007 1:12 AM
  • foneguy9foneguy9 subscriber Posts: 2
    As to a previous Post by Piper for Answer # 3, it comes to $1700.00.  So I will need to get a really Inexpensive, Lawyer and Accountant then for an S-Corp to make sense!!!!
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