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Posted by james.smith99 on September 22, 2008, 7:59 pm
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Greetings,
I am starting a company. The company will publish a financial
newsletter that will tell people what to invest in and how much to
invest. I will not be giving any individualized financial advice. I
expect it to be a one-person operation. Also, everything will be done
over the Internet.
My basic question is: Which business entity should I form? Which state
should I form it in? I would like to have limited liability and save
on taxes; and I'd like it to be easy to maintain the business entity.
I've read a lot about this, but I am still confused.
- Some people recommend forming an LLC in a corporate friendly and /
or tax-haven state.
- Some recommend against forming single-member LLC's, because they are
not recognized by the federal government and some states.
- Some say to form the company in the state in which I will be doing
most of my business. This is because if my company does business in a
state other than the one in which it was formed, I still have to
register it with that state. Since the newsletter will be provided
over the internet, what is the implication of this? Would I have to
register the company in every single state?
- Some say that an LLC will not limit my liability, since limited
liability only protects the owner of a business from the wrongdoings
of his employees.
- How does forming the company in a tax-haven state really help? As
soon as I take the money out of the company, I will be taxed by my
state. I've heard that some people who own single-member LLC's have
the LLC buy whatever they need. That way, the money is never
transferred from the company to them, and so is never taxed by the
state. Is this legal?
- According to the Small Business & Entrepreneurship Council, the most
business friendly states are South Dakota, Nevada, and Wyoming. Should
I form the business in one of those states? (I do not live in any of
them.)
Thanks.
--
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Posted by Seth on September 22, 2008, 10:25 pm
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>I am starting a company. The company will publish a financial
>newsletter that will tell people what to invest in and how much to
>invest. I will not be giving any individualized financial advice. I
>expect it to be a one-person operation. Also, everything will be done
>over the Internet.
>
>My basic question is: Which business entity should I form? Which state
>should I form it in? I would like to have limited liability and save
>on taxes; and I'd like it to be easy to maintain the business entity.
You will pay the full taxes of your home state. You want to avoid
paying taxes to other states, so the entity should live in the same
state you do.
You might get some protection from a Subchapter S corporation. You
won't get very much.
>- Some say to form the company in the state in which I will be doing
>most of my business. This is because if my company does business in a
>state other than the one in which it was formed, I still have to
>register it with that state. Since the newsletter will be provided
>over the internet, what is the implication of this?
You do business where you publish the newsletter. (If you host it on
a web site, you might be doing business where the site is physically
located, if it's physically located.)
>- Some say that an LLC will not limit my liability, since limited
>liability only protects the owner of a business from the wrongdoings
>of his employees.
You can't limit your liability for your own individual actions
(e.g. defamation).
>- How does forming the company in a tax-haven state really help? As
>soon as I take the money out of the company, I will be taxed by my
>state.
Except for a C corp, you are taxed when the entity earns the money,
not when you take it.
> I've heard that some people who own single-member LLC's have
>the LLC buy whatever they need. That way, the money is never
>transferred from the company to them, and so is never taxed by the
>state. Is this legal?
No.
Seth
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<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by removeps-groups@yahoo.com on September 23, 2008, 11:14 am
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On Sep 22, 7:25 pm, se...@panix.com (Seth) wrote:
> You do business where you publish the newsletter. (If you host it on
> a web site, you might be doing business where the site is physically
> located, if it's physically located.)
No. I'd say the place where you do business is where you were working
when you wrote the newsletter, advice, etc. Where the site is
physically located is irrelevant. By physically located I mean where
the datacenter of the site is. That depends on which web hosting
company you choose. Besides, the web hosting company may change the
location of the web server from one city to another, or perhaps they
use load balancing and host your website on many servers throughout
the country.
> You can't limit your liability for your own individual actions
> (e.g. defamation).
Where does one draw the line between an action taken by the individual
and an action taken by the company? I suppose the case of defamation
is clear-cut, but what about others?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by Seth on September 23, 2008, 11:49 am
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>On Sep 22, 7:25 pm, se...@panix.com (Seth) wrote:
>> In article
>
>> You do business where you publish the newsletter. (If you host it on
>> a web site, you might be doing business where the site is physically
>> located, if it's physically located.)
>
>No. I'd say the place where you do business is where you were working
>when you wrote the newsletter, advice, etc. Where the site is
>physically located is irrelevant. By physically located I mean where
>the datacenter of the site is. That depends on which web hosting
>company you choose. Besides, the web hosting company may change the
>location of the web server from one city to another, or perhaps they
>use load balancing and host your website on many servers throughout
>the country.
That's the case where it _isn't_ "physically located".
I own a server that's currently in Virginia (I'm in Minnesota). If I
were to engage in such a business using that server, would Virginia
claim I was doing business there?
>> You can't limit your liability for your own individual actions
>> (e.g. defamation).
>
>Where does one draw the line between an action taken by the individual
>and an action taken by the company? I suppose the case of defamation
>is clear-cut, but what about others?
Physical actions are taken by the individual (and the company may also
have liability if he does it as part of his employment; this matters
when the company has more assets). Some logical actions (e.g. signing
a contract that says "Company X, signed by Person Y, President") are
taken by the company.
Seth
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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Posted by james.smith99 on September 24, 2008, 12:22 am
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On Sep 22, 10:25 pm, se...@panix.com (Seth) wrote:
> You will pay the full taxes of your home state. You want to avoid
> paying taxes to other states, so the entity should live in the same
> state you do.
Thanks. That's succinct and to the point.
What if I move after I start the company? To minimize taxes, would I
then have to re-register the company in my new home state? To take
this a bit further, what if I am always moving? The concept of a home
state / location where business is done seems to me to be moot with an
internet business.
> You do business where you publish the newsletter. (If you host it
Right. But since it's published over the internet, I could conceivably
be anywhere. I could even be outside the country (and thus, not in any
state). With an internet business, how does the law determine that I
am in a particular state for tax purposes?
--
<< ------------------------------------------------------- >>
<< The foregoing was not intended or written to be used, >>
<< nor can it used, for the purpose of avoiding penalties >>
<< that may be imposed upon the taxpayer. >>
<< >>
<< The Charter and the Guidelines for submitting posts >>
<< to this newsgroup as well as our anti-spamming policy >>
<< are at www.asktax.org. >>
<< Copyright (2007) - All rights reserved. >>
<< ------------------------------------------------------- >>
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