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Question About Conducting Business in a State, for a Corporation Registered in Another St.

Discussion in 'Business & Tax Advice' started by madblacker, Nov 17, 2009.

  1. madblacker

    madblacker Regular Member

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    I've been reading up a bit on incorporating and am interested in incorporate my "ventures" as separate corporations, probably in the State of Nevada. I currently live in California, actually I may be moving to Nevada, as a matter of coincidence, at some point, but for now I am planning it as if I would still be living in California. I understand that it is called a "foreign corporation" when it is registered in another state and you do business in a state that the corporation was not registered in. This subjects you to taxes, etc in the "foreign" state.

    My question, for anyone experienced in this sort of thing, is what constitutes doing business in a foreign state? I would not have an official office or, at this point, be hiring employees in my own state (California). I would, for now, mainly be taking in income from affiliate programs, article publishing companies, etc, but, at some point, may also be doing work for clients who would be located anywhere, possibly, at times, in California (or other "foreign" states).

    Basically I'm wondering if anyone can shed some light on what would constitute doing business in foreign states, does this mean even receiving income from an affiliate, that is not located within my state of incorporation, would be conducting business in a foreign state?

    Any info is appreciated, its hard to find info on this as most info out there isn't geared to people running internet businesses.
     
  2. Michelle1

    Michelle1 Newbie

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    What is your motivation for setting up a company in a state that you don't reside in?

    Privacy, to keep your info out of the public record, less filing fees, less paper work?

    Unless if your answer is one of the above, you just register with the state you reside in as that is easiest.

    The LLC is the easiest entity to form to protect you personally from liability. If you wish to keep your information private, pay few filing fees and have less paperwork, DO NOT file a Nevada LLC. Nevada LLCs are not private and they can be expensive. Sure you can use a nominee manager to put their info on the public record, but 30 days later, you have to fill out a paper that lists all the members of the LLC.

    I think it is $125 to set up the LLC in Nevada, then another $100 for something else and then you have to pay a franchise tax of I think $100 a year to the state.

    I'm currently looking at New Mexico LLCs. Cheap, non intusive and you are done with all the hassles once it is set up. The only problem is that if you do not live in New Mexico (or Nevada or Wyoming, or wherever you set your LLC up), you have to register with your state that you live in as a foreign franchise. And guess what? There goes all your privacy, and lack of paperwork and lack of fees.

    Theres only two ways around this that aren't terribly expensive that I can figure. One is to do the New Mexico LLC and get a business bank account using your nominee or registered agent's address (of New Mexico). If they ask why you are a resident of another state with a NM address, just say you moved, are going to college, etc. Take your business bank account money, transfer it to your personal bank account and pay your taxes that way (since single member LLCs are pass through taxation). See my other posts about this.

    The 2nd option is to set up a trust. And have the trust own the LLC with the beneficiary being you. I don't know much about this though.
     
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  3. yeahsure

    yeahsure Registered Member

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    Without knowing much about this myself, I recommend you take a look at "nexus" tax. That is, when your company do business in some states, you automatically owe that state sales tax.

    You may also want to take a look at the "digital downloads" sales tax, as the "nexus" tax is linked to this.
     
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  4. madblacker

    madblacker Regular Member

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    Thanks for the info, I will look into this further