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LLC incorporating?

Discussion in 'Business & Tax Advice' started by EmpireQuality, Jan 17, 2013.

  1. EmpireQuality

    EmpireQuality Elite Member

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    hey everyone.
    i am looking to start a new LLC in delaware.
    i live in NJ.
    Do you have any recommendations on where to get everything set up?
    i appreciate any help.
    thank you!
     
  2. burnett4congress

    burnett4congress Jr. VIP Jr. VIP Premium Member

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    I see this kind of question a lot. There are several issues you need to consider:

    Choice of entity:
    Your basic choices are C corp, S corp, or LLC. Each has its own advantages and disadvantages.

    LLCs became really popular in the last 10 years because they have certain flow-through losses and depreciation that fits really well if you have a high income and own real estate.

    C corps are big-boy corporations. The major advantage for IMers is that C corps can have foreign owners. So if you live in India and want to make Internet Millionzz, you can use a C corp to create an American identity. The disadvantage is that you are supposed to have annual shareholder meetings and board meetings. And keep minutes. And keep those minutes on file. If you neglect to do this and get sued, your corporate protect evaporates in a puff of shredded paper.

    S corps are small corporations. No foreigners need apply. But, somewhat like an LLC, they are pass-through entities. For most people, this is the best of both worlds. You get the flexibility of a corporation and the benefits of pass-through losses (if any) like an LLC.

    *Note: you can form an LLC and then elect to have it treated for tax purposes as an S corp (or anything else for that matter).

    Location of incorporation:
    Now you said you live in NJ but want to incorporate in DE.

    First off, DE is where big banks and such incorporate because DE has some favorable laws and treatments for public companies. These reasons do not apply to you and me.

    Other people like to incorporate in FL, TX, WY, and a few other places because there is no state income tax in those states. Then there are those who really like NV and WY because you can do stuff like issue bearer bonds.

    But! If you are an owner of this corporation and live in NJ, NJ will come to you looking for its piece of your income from that corporation. So it's largely a moot point.

    Also, if you incorporate out of your home state, you will need an address in that state and someone there to receive notices and mail. That's called a registered agent. This usually costs somewhere around $150-$250 a year. Unless you are making a ton of money, it's usually not worth it.

    There are techniques you can use to minimize this tax burden like income splitting (if a C corp) and just expensing as hard as you can before retaining earnings or making a shareholder withdrawal.

    Where to get everything set up:
    You can search online for some company to incorporate you. I do it myself, if you are interested. You will need an address in the state, a person designated to receive mail, your name, your address, your SSN, plus whatever fees are involved.

    Or you can follow the DIY and read through the secretary of state's site in whatever state you incorporate in.

    Either way, when you're done you'll get articles of incorporation (or something similar) and a FEIN (tax ID). Those two will allow you to get bank accounts, credit cards, etc etc.

    If you have any more questions, let me know.
     
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  3. el_capitan

    el_capitan Junior Member

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    I used LegalZoom, and signed up to there $30 month option to speak to multiple (unlimited) business lawyers (from all 50 states). I did my research and spoke to about 7 different attorneys from 7 different states. I decided to register in Delaware because of various reasons.
     
  4. pwcbb11

    pwcbb11 Junior Member Premium Member

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    Just to addto that: If you want to do the registered agent in a different state, you can use ups mailbox and register it there. Ups will forward that mail to whatever address you like. Been doing it for two years now. They have mailboxes of various sizes and pricing (200-400/year)
     
  5. wizzardz01

    wizzardz01 Power Member

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    Interesting in this also, i am from Europe (Bosnia) our law is shit and everything here is shit about business...people don't know how to use tax on internet stuff etc. i would like also to register in DE an LLC, could you tell me, will i normal do with my clinets from Bosnia? And what is minimum for paying to get all rdy for an LLC in DE? I was reading its about $1000 for start and $500/year. Something like that? Sry for my bad English.
     
  6. burnett4congress

    burnett4congress Jr. VIP Jr. VIP Premium Member

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    To own an LLC, you need an American social security number (SSN) or an American international taxpayer ID number (ITIN). If you don't have either of those, you need to use a C corporation.

    $1000 to start and $500 a year is on the high side. You can probably get it done for about $500-$750 to start and around $250 a year.
     
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  7. wizzardz01

    wizzardz01 Power Member

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    Great to know! Thanks you so much, i am still thinking about this solution, but definitiley one day if I would like to open some kind of company do it on this way in DE.
     
  8. EmpireQuality

    EmpireQuality Elite Member

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    thank you for the info.
    i want my LLC in Delaware because i hear that it has a strong corporate veil which gives me as an individual a lot of protection.
    is this true?
    just want to make sure, so i live in NJ but my business is located in delaware, that means i still have to pay NJ state income tax?
    i know federal income tax has to be paid in every state so that's not something to think about.
    also please keep in mind that this is strictly a digital internet business so i don't plan on getting mail or anything lol.
    i am an adsense publisher and i also do some CPA, more income streams will come in the future but thats pretty much all i do for now.
     
    Last edited: Jan 18, 2013
  9. burnett4congress

    burnett4congress Jr. VIP Jr. VIP Premium Member

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    It doesn't matter whether you plan on getting any mail or not. Any state you incorporate in will require a mailing address in that state. So you need to factor that into you costs.

    Delaware's corporate veil case law really has nothing to do with a tiny company like yours. When your revenues are above $10 million annually, then you might want to get some expert legal help.
     
  10. EmpireQuality

    EmpireQuality Elite Member

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    i understand.
    maybe incorporating my LLC right here in NJ could be ok then.
    what about "so i live in NJ but my business is located and headquartered in delaware, that means i still have to pay NJ state income tax? or do i pay delaware state income tax? or both? and how can i avoid local government tax?
    i know federal income tax has to be paid in every state so that's out of the way lol"
     
  11. burnett4congress

    burnett4congress Jr. VIP Jr. VIP Premium Member

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    Which state(s) you pay tax in will depend on how you set things up.

    If you have a C corp in Delaware, the corporation will pay taxes in Delaware. Then any distributions to you in New Jersey would be taxed by New Jersey and the feds again. That's what the whole "double taxation" thing you might have heard about is.

    If you have a flow-through entity like an S corp or most LLCs, then you will be paying New Jersey tax on any earnings that show up on your personal tax return.
     
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  12. EmpireQuality

    EmpireQuality Elite Member

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    interesting. so what would be a simple option to avoid double taxation?
    i guess incorporating in my home state of NJ would do that, but then i would have to pay state income tax unlike florida.
    i appreciate your help, i am still fairly new to all the legal parts of business. thank you.
     
  13. burnett4congress

    burnett4congress Jr. VIP Jr. VIP Premium Member

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    Yes, incorporating (LLC treated as an S corp or a straight S corp) in your home state is simplest.
     
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  14. Turbo10

    Turbo10 Junior Member

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    I would take a serious look at Wyoming. Here is a comparison between popular tax haven states. http://www.incorp.com/where-to-incorporate.aspx

    Wyoming privacy is excellent. The list of benefits is long. S-Corp rules. Get a registered agent: they are your address. $99/year is very common. If you want to build your Nexus/business credit, then just get a virtual office too.
    Nevada privacy is crap due to the $200/year business registration and license.
    DE has a ton of corporate case law for strong protection but as was stated, that doesn't really apply to you, and they're expensive. Good luck!
     
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  15. EmpireQuality

    EmpireQuality Elite Member

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    awesome. i will definitely take Wyoming into consideration. thank you.

    so say i incorporate in my home state of NJ but move in a few months to a new state.
    my company will still be headquartered in NJ but i will be living in a new state.
    i would only pay double tax if i move my money from my business bank account to my personal bank account?
    because then the income would fall under personal income as well as corporate income?
     
  16. janstastny

    janstastny Junior Member

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    what is a good solution for someone living in indiana?
     
  17. WHATITDO

    WHATITDO Newbie

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    I would contact an accountant. Depending on the type of business & money you're generating it can have farreaching consequences that could mean the difference between 10,000s or 100,000s
     
  18. EmpireQuality

    EmpireQuality Elite Member

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    yea, i probably am going to link up with an accountant soon.
    i need to get some questions answered about this, and also pay 2012 taxes.
    consequences?
     
  19. tax_guy

    tax_guy Newbie

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    OP, you've already gotten some really good advice. Please allow me to add a little bit more advice...

    the whole incorporating in DE thing is a big mess if you ask me. My clients ALWAYS ask me about that (b/c there's NO corp tax in DE). it sounds good, until you realize that you will be responsible for PERSONAL tax. yes, you would pay personal tax in DE even though you don't live there b/c your income is derived from the state of DE...unless you are an employee of your own company (which many courts don't buy). As far as the double taxation, S corps (and LLCs electing S-Corp status) avoid taxation at the Corp level, so you are ONLY responsible for Personal tax. But wait....

    That's only at the federal level! You will still have to pay taxes at both personal and corp level to your state (although some states respect the S-corp treatment and allow pass-thru). In light of all this, i would say incorporate in your home state of NJ...that is if you need to incorporate at all. it's NOT about transferring money from biz to personal account, its about accounting theories really. feel free PM if you have any other questions...
     
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  20. tax_guy

    tax_guy Newbie

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    can you tell us a little bit more about your business? that'll help tell what type of business solution fits you. feel free to PM me directly...