Where do I form my LLC?

[patriot29]

So I'm starting an online business (a muse) and I think I should form an LLC. What state is best to form it in given that this business is entirely virtual?

[final_id]

I heard Rhode Island has great tax laws for business, incentives for you to set up corporations there, but I can't confirm it personally. And I know Florida has no personal income tax. That's all I know. Anyone else?

[patriot29]

I know next to nothing about this, so if someone could start from the beginning or provide a link for that, it would be much appreciated.

[jetpacklife]

Well, of course you should seek the advice of an accountant in your state.

I do know that it's generally advised for small companies to just form in their state of residence. Otherwise, you need to hire an "agent" in the other state that your incorporate in. LLC has pass through taxes, so you're going to have to pay your state taxes on income anyway.

It might be a consideration if you're thinking of moving though. CNN did a good rundown on the complete taxes that a typical family pays (not just income)

http://money.cnn.com/pf/features/lists/taxesbystate2005/index.html

Rhode Island is one of the highest taxed states.

[Zntow]

Forming a company is just on other area of the law that is clouded in mystery just to keep lawyers employed. I believe that forming an LLC is really quite simple. I have just recently formed another company in my state and I will show you how I did it.

I currently live in the state of New Hampshire. All it takes in this state to form an LLC is to fill out the two page form and pay a fee of $50.00 for filing and $50.00 for a form SRA. I went to the Secretary of state website at: http://www.sos.nh.gov/corporate/Forms.html and found the PDF version of the forms and filled them out. This took about twenty minutes. I then drove to the state capitol and went to the Secretary of state’s office were I filed my forms. Check it out and you will see how simple it is. Perhaps your state is similar.

I incorporate my test companies in my own state because it is easier and faster and it's easy to get a registered agent (friend, relative etc.) Why worry about taxes when you don’t even have any money coming in? When your company gets cash, create another entity and make your fancy tax moves with the money the venture has earned.

The hardest part of this process is finding a company name that has not been used already in the past. Much of the process for getting your corporation formed in this state has to do with the state making sure that your corporate named entity is not already in existence. The day I filed the Secretary of state’s office was experiencing a computer crash and was unable to process any applications that day. I ended up having to wait two business days in order to find out that my company was formed. I was able to do this by going online and checking at the website. You’re also able to look up all the appropriate laws on line also. A few days after that I received in the mail my corporate documents at the corporate entities registered business office.

I went online to the IRS website and received online my corporate employee identification number EIN instantly.

With this and my corporate paperwork I was able to go to a local bank and open my corporate checking account with an initial balance of $25.00.

The total personal time for my do it yourself company formation, including my travel time was about two hours over a period of about two weeks to get it all done. Total cost about $150.00

The first company I formed many years ago, I used a manual that I bought from Bill Bronchick. You can find his work at www.Legalwiz.com. His manuals are not cheap, but the information is very useful and will last you a lifetime of company creations.

If you don’t have a lot of cash you can get the e-book called Breaking Free by Brian Armstrong. It’s $12.95 and a little long on the mental set up aspects of setting up a venture, but it has a great section on the nuts and bolts of getting a corporate entity set up. Find it at: http://www.startbreakingfree.com/breaking-free. A good blog too…….

[deanypop]

I can also highly recommend the Nolo law book series (for really just about anything). This publisher focuses almost exclusively on helping individuals with legal dealings - though they're not afraid to indicate where you'll get more bang for buck out of a lawyer.

For LLC stuff specifically, it looks like they have some software to generate the proper forms/filings, and a book about it (which I have and can also recommend):

http://nolo.com/resource.cfm/catID/BAAE1B67-F54A-41B4-91943A51F56C3F79/111/182/245/

I definitely concur that, first time out, you should go ahead and file in your home state... for an LLC that hasn't made money yet, you're better off not worrying about how to shave your taxes until you have a tax bill to cry about. ;)

Think of it this way: the faster you're set up, the faster you'll be making money to pay the accountant/lawyer who will advise you to move it all to Delaware for tax purposes.

[patriot29]

Thanks for the great advice all, much appreciated.

[coollikeme]

Nevada or Delaware. It really depends on what type of business you have.

[final_id]

Oh yeah, Delaware. That was it. :o Not Rhode Island, Delaware ...

[kjmastaw]

You can do this online - legalzoom.com . It's a simple form. And you'll save the $100 a CPA or lawyer will charge you!

[turk]

Hello all,
I have formed a corp. both in NV and DE for the tax and corporate veil blah blah

What everyone forgot to mention was the local laws in the state you live in. As in if you have a NV coproration and make money in NC you still have to pay NC taxes. And there is a thing call foreign corp. doing business in xxxxx State.
Where every year you have to keep paying to your state for doing business in their state.

It turns out States don't like their residents not pay taxes by forming corp. in DE or NV.

A good (meaning aggressive) CPA and an attorney will help you do it right.

DO NOT DO IT ON YOUR OWN. DO NOT DO IT WITHOUT TALKING TO YOUR OWN ATTORNEY ( you can get an advise from an attorney for $150)

I did it on my own and couldn't benefit at all from the coprorate veil as I had hoped for because I tried to save that $150.

Good Luck

[Zntow]

I form my initial companies in the state in which they operate. I read and follow the laws of that state.

Not to sound like a jerk, but the last time I checked my states corporate laws were written in English. I can read and follow directions. If you do not obey the laws set forth by the state in which your entity is operating you could possibly get into personal trouble.

No matter who sets up your company, an agent, an attorney or your mother….If you do something in your company against the laws of the state in which your company operates, your corporate “veil” the protection provided for by law can be pierced and you can be held personally liable for your actions.

This includes not keeping up with your corporate paperwork, keeping separate accounting records etc. All of this stuff is general business knowledge that you can get from a number of sources.

Just like it was said in the movie Wall Street, you have to do your own homework.

You can get your advise from an attorney, but it's expensive.





A lawyer died and arrived at the pearly gates. To his dismay, there were thousands of people ahead of him in line to see St. Peter. But, to his surprise, St. Peter left his desk at the gate and came down the long line to where the lawyer was standing. St. Peter greeted him warmly. Then St. Peter and one of his assistants took the lawyer by the hands and guided him up to the front of the line into a comfortable chair by his desk.

The lawyer said, "I don't mind all this attention, but what makes me so special?"

St. Peter replied, "Well, I've added up all the hours for which you billed your clients, and by my calculation you must be about 150 years old!"