Comments on: Why (not) form an LLC in Nevada (or Wyoming)?

By: Dana

Dana — Mon, 18 Jul 2011 18:59:30 +0000

@Jason
I cannot provide a direct answer to your question, because I am not a tax expert and I am not familiar with Arkansas law.

However, when a California-based entrepreneur contacted me recently with a similar idea, I concluded that it would not likely work (assuming the entrepreneur was honest), because Amazon cared about where he resided, which would not change. Please see “Re-incorporation Won’t Save Amazon Affiliate from Termination” at http://dana.sh/ri0nL2.

By: Jason

Jason — Sun, 17 Jul 2011 05:59:09 +0000

Hi Dana,

I recently lost a lot of income because of Arkansas’ new internet tax law, mainly Amazon.com refusing to allow affiliate partnerships with Arkansas residents and canceling our accounts.

I do business online solely and have no physical location. Furthermore I have business partners that live in other states.

I was hoping to form a Nevada S Corporation and operate my business in the “cloud” or internet and allow the S corp to pass through the shareholders incomes to their state of residence.

MyCorporation.com has a mail forwarding service and I was hoping to use that address for my corporations for our bank account. Is this possible or even legal?

I need to circumvent this internet tax law and remain an Amazon.com affiliate partner.

Any ideas?

By: Dana

Dana — Thu, 14 Oct 2010 13:48:01 +0000

@Peter
From the purely legal perspective, I recommend forming the business in the state where you will be located (OR).

In your situation, however – as noted in the post’s last bullet – because multi-state (and international) tax considerations are so tricky, you should consult with a qualified tax advisor (in OR).

By: Peter

Peter — Thu, 14 Oct 2010 13:38:15 +0000

I am marrying an American and moving to Oregon which has the highest income taxes in the States. I have an international company where I consult and do sales and service all over the world including the U.S. (various states).

Where should I register my business?

By: Dana

Dana — Mon, 16 Aug 2010 22:45:48 +0000

@Andrew If you form in DE or NV, you still will have to register as a foreign entity in the state where you are doing business, so you will have to pay two states' annual registration fees.

By: Andrew

Andrew — Mon, 16 Aug 2010 16:22:17 +0000

@Jorge I have the same situation that Jorge describes: an interenet SaaS business with sales to multiple states. Furthermore, I won't initially have any sales in my state of residence. Would it be advantageous to form my LLC/corp in Delaware or Nevada?

By: Dana

Dana — Mon, 09 Aug 2010 17:29:33 +0000

@Jorge
Now that you are located in CA, you almost certainly will be “doing business” here (please see the post at http://danashultz.com/blog/2010/05/24/doing-business-in-ca-be-sure-to-register/), so you might as well form your company’s legal entity here.

If you will be selling to customers located everywhere, your company’s state of formation will not have a material effect on you obligation to collect sales tax.

By: Jorge

Jorge — Mon, 09 Aug 2010 11:46:53 +0000

What if it is an internet company, which offers hosted software use subscriptions? Sales are to every possible state, and some international. I just recently moved to california from texas. All sales are online. I dont even want to handle sales taxes, which makes me think of delaware as well.

By: Jesse

Jesse — Tue, 25 May 2010 20:27:29 +0000

Ok, thanks for explaining this to me — I’m very new to it and don’t want to do the easiest thing now only to have it be a mistake that comes back to haunt me later. But I’d certainly appreciate the greater simplicity and lower cost of just forming an LLC in my current state.

I imagine that depending on the state where I form any given LLC, I might then have to file at least some sort of informational tax return even after moving out of the state and even if I don’t owe any money. But perhaps I’m mistaken about that or perhaps that’s less of a burden / expense (for tax prep) than forming in a neutral state.

By: Dana

Dana — Tue, 25 May 2010 19:10:05 +0000

@Jesse
It will take no more effort to maintain an LLC in your old state than to maintain an LLC in a neutral state.

It will take no more effort to register an old-state LLC in your new state than to register a neutral-state LLC in your new state.

There is no need to move an existing LLC from the old state to the new state.

If you move to new states multiple times in the future, you may end up with LLCs formed in multiple states – no problem.

There is, near as I can tell, no principled basis for choosing a neutral state – largely because there is no benefit (that I can see) from choosing one. On the other hand, if you form each LLC in the state where you then are living, you will have, at the least, the benefit of minimizing formation costs and effort (no foreign registration) at that time, and of minimizing ongoing costs and effort with respect to that LLC so long as you continue to live in that state.