Unusual Situation for New DE LLC

[struggling1]

What is the name of your state?

This is part of the question that I'm struggling with! So, a friend and I are both students, trying to get an internet based business (selling retail products) established so as to pay the bills. We met while we were both studying in Europe, I recently returned, he is still there. We recently incorporated as an LLC in DE. The rationale was that though we are both US citizens, neither of us have "stable" residency in any particular state (we don't own land or cars), that DE would provide us with a bit more flexibility. So, the question is, what are our responsibilities now that we have incorporated, as regards state tax? We have a registered agent and mail forwarder in DE, which we have thus far considered as our "business address." My closest tie is with NC (where I filed taxes last year and this year), though I am presently trying to finish my doctorate and am thus forced to travel to do research (IL and WI mostly). My friend is from MD, but as I said, lives in Europe at present. Our business for the coming year or two is going to be done from various different states, and from Europe, all online. We're probably going to open an account with a web-bank. So...what does this mean as regards filing as a foreign corporation? Do we need to do it in MD and NC, even though little to no business activity at all is being done there? Can we just file in DE?
We both hope to be settled somewhere in the states in a year or two, but at present, what do we do?
Part of my struggle is trying to understand what it means to be incorporated. My understanding is that once a business is incorporated, it is a separate entity from me--I am just one of the company's employees (and a major shareholder), so wouldn't I just pay taxes on my income to whatever state I file in?
PS: If we do need to file as a foreign corporation, is there a timetable for that? Or does it just need to be done before we start conducting business?
Thanks in advance!

 

[gettingstarted]

Ever figure it out?

Hi struggling1,

I'm in a similar situation to you. Did you ever get this situation resolved? How are you formed now? Out of what state do you operate and in what states have you qualified as a foreign corporation? Appreciate any info .. I'm including a general note that I'm posting elsewhere as to my situation and would appreciate any info.

Thanks
John

-----------------

Hi,

I'm starting a business that will sell digital products and services over the web. I'm trying to determine where best to file an LLC. One of the goals of starting a business that is completely operated over the internet is to free myself up to move - I live in Wisconsin now but will be moving to Canada in August. I'm hoping it's possible to use the Internet such that my business operates out of 1 state, no matter where I, as the owner, am located. I would just pay taxes as a non-resident in the state of incorporation and claim a credit on my Wisconsin personal tax form while in the US. Is this possible?

Here are some of the questions I'm playing with:

1) Do I need a physical mailing address in the state of incorporation in order to also allow it be the state of operation? Or can a registered agent fill that need, so that the business not actually need have a separate physical location?

2) Assuming a registered agent is all that's necessary, can I then open up a business bank account in the state of incorporation and transact all business in that state? Will selling services and goods to clients in other states necessitate that I qualify to operate in the clients' respective
states? Or will they operate in my state? Will the fact that all
transactions take place in the state of incorporation allow it to also be the state of operation, taking precedent over the fact that I'm working on a computer in another state (or country)?

3) Does the location of any equipment I use to operate the business, such as the location of my host's web servers or the computer that I'm using to answer email, program, etc. constrain the state of operation? In other words, if I have assets that participate in the business, must my business qualify to operate in any state in with the assets are located?

What I'm hoping I can do is file the LLC in a state like Delaware or Nevada (any suggestions on currently the most friendly state to Internet Businesses?), open a bank account over the internet with a bank in that state and have a registered agent set up for any physical mailings or notifications. I would then be free to live in any state of my choosing (or internationally), while for tax purposes the business operates out of the state of incorporation, regardless of where I'm doing the work from or where the assets (such as web servers) are located. And I would only file state taxes in the state of incorporation/operation.

 

[divgradcurl]

If you are just an LLC, and have not asked for income to be taxed at the corporate level, any income to the LLC should simply "pass through" the LLC and would be reported as earned self-employment income on your personal income tax. In other words, you shouldn't be paying any corporate tax if your LLC is set up like most LLC's are -- you simply pay tax as if the income to the LLC was personal income, and then you can usually deductt the expenses of running the LLC as self-employment expenses, so essentially you are paying taxes on the profits alone as part of your personal income taxes.

You might want to see an accountant to make sure. Besides, if your LLC is making any significant amount of money, you may be required to file quarterly estimated tax statements -- again, check with an accountant.

 

[gettingstarted]

Thanks for the info. Yes, I will not elect to be taxed as a corporation, but instead report on my personal return. What I guess I'm trying to figure out is how to do this as simply as possible. Given that I'm running a "virtual" business (which in reality can be managed from anywhere) and that I will definitely be moving, I'm trying to get together a strategy that speaks to 2 issues:

1) How do I take advantage of my business to minimize the number of states I have to report income to, long term? Can I take advantage of the fact that my business is over the internet to consolidate the state of incorporation and the state of operation, and then file in that state as a non-resident?

2) How do I minimize other state-required documentation? Can I structure myself initially so as to only have to worry about business licenses, franchise fees, etc. in one state, rather than in multiple states? Since my business is over the internet and not local, what strategies can I use to ensure that all transactions occur in my state, or at such a level that I do not have to qualify as a foreign corporation (get business licenses, etc.) in other states?

Just wondering if there are any business owners who have already run into these issues and solved them??

Thanks
John