We are proud to announce our NEW community destination. Engage with resident experts and fellow entrepreneurs, and learn everything you need to start your business. Check out the new home of StartupNation Community at startupnation.mn.co

DotCom Taxation for LLCs

bbqchickenrobotbbqchickenrobot subscriber Posts: 2
edited September 2007 in Selecting a 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?  


  • bbqchickenrobotbbqchickenrobot subscriber Posts: 2
    hmmm.... I think I might have posted this in the wrong place... lol
  • PiperTaxPiperTax subscriber Posts: 5
    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.
  • InvestorFundingInvestorFunding subscriber Posts: 0
    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.
  • PiperTaxPiperTax subscriber Posts: 5
    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.) PiperTax2007-9-7 9:46:59
  • bbqchickenrobotbbqchickenrobot subscriber Posts: 2
    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 bbqchickenrobot2007-9-7 16:12:1
Sign In or Register to comment.