Lots of confusion about incorporation
 

My two partners and I are looking to incorporate our business, which is a website. First, any recommendations for one of the many companies out there that will take care of all your incorporation needs for you and send you all the paperwork, act as your registered agent, etc.?

Ok so from my reading I see the obvious advantages of incorporating in Nevada, however, the three of us are located in two states other than Nevada. Will we need to apply for foreign business certification in our home states? Keep in mind our business and product are 100% web-based and our income comes from customers located all over the world. In fact, the server our site is hosted on is in another state too if that matters at all. I am very confused over when foreign business certification is needed but my inclination is we do not need to be certified in any state besides whichever one we choose to incorporate in.

Finally, what are the tax benefits of the various incorporation methods? It seems we can file as an LLC and choose to be taxed as a corporation, and further as a sub-S (two separate forms to IRS). This seems optimal so that we don't need to follow the stringent requirements of a C corporation, but get the tax benefits of one, and can choose how to divide our income between salaries / dividends / business expenses. Am I thinking about this right?

Finally, if we incorporate in Nevada will we have any trouble opening a business bank account in another state?

Any experiences or informed opinions on these issues are welcome.

Thank you very much in advance,
DeathDonkey

Re: Lots of confusion about incorporation
 

check out llc options first for tax reasons.

Re: Lots of confusion about incorporation
 

From http://www.entrepreneur.com/manageme...icle60282.html

I want to form a company for a new software product that I'm really excited about. Having been sued once in the past, however, I want to be darn sure it never happens again. I understand that if I incorporate my new business in Nevada, I am totally "off the radar screen" such that nobody can ever sue me personally, and I also save a bundle on taxes. Is that correct?

Sandy Botkin, a CPA and former IRS agent, points out some of the myths of incorporating in Nevada in his new book Lower Your Taxes--Big Time! (Click here for more tax-saving tips from Botkin.) Here they are:

Myth No. 1: Your costs are lower. "Nothing could be further from the truth," writes Botkin. "It's usually cheaper to incorporate in your home state. The reason is that Nevada has a number of fees that many states don't have, and although Nevada has no corporate income tax, you usually have to file a corporate tax return in the states where you're doing business as a nonresident."

Myth No. 2: You will save taxes. Similarly, Botkin says that if you are doing business anywhere other than Nevada, you will still have to pay taxes in the states where you are doing business. Because most states charge out-of-state companies slightly higher rates and fees than they do domestic companies, you may actually end up paying higher taxes than if you had formed a company in your own state.

The biggest reason for incorporating in Nevada, according to Botkin, is that Nevada offers corporate directors and shareholders tremendous protection against personal liability. In his book, Botkin reports that in the past 23 years, Nevada courts have only once imposed personal liability on a corporation's shareholders for corporate debts!

In addition, the directors and shareholders of a Nevada corporation are not named in public records, and Nevada is less willing than many other states to share information about its corporations with other states and with the federal government (although Botkin points out this has changed significantly in the wake of the 9/11 terrorist attacks). As a result, Nevada has become a haven for celebrities, movie stars and other highly visible individuals (such as big company CEOs) who seek anonymity when conducting their business and investment activities.

Sad to say, for the same reasons, a lot of con artists also find Nevada an ideal place to hide behind their corporate "shells," to the point that a wealthy investor friend of mine says, "When I get a business plan in the mail from a company that's incorporated in Nevada but has its mailing address in another state, I think 'Fly by night' and chuck it in the wastebasket." An unfair prejudice, to be sure, but one that is increasingly widespread in the business community. The bottom line: Unless you are actually doing business in Nevada, don't set up your company there.

Re: Lots of confusion about incorporation
 

If you are going to set it up as a corp. I would suggest an LLC to begin with. You can always change later. I assume that you all have other jobs other than this website. If you set it up as a C-Corp you can not write off the losses against you primary income. Your losses would carry foreward and could be used in the event that your website makes a profit.

If you incorporate as an LLC then you can write those losses off against your primary income this is a huge advantage over a C-Corp when you are first starting out.

Re: Lots of confusion about incorporation
 

Here's a post I made before that includes some info about the various business entities.

Re: Lots of confusion about incorporation
 

[ QUOTE ]
Sandy Botkin, a CPA and former IRS agent, points out some of the myths of incorporating in Nevada in his new book Lower Your Taxes--Big Time! (Click here for more tax-saving tips from Botkin.) Here they are:


[/ QUOTE ]

Botkin's book is quite good. If you are thinking about starting a business, pick it up at the bookstore or on Amazon. It contains a ton of basic tax information you won't think of on your own but is helpful to know.

Re: Lots of confusion about incorporation
 

Bradley: My confusion stems from the part about "you will still have to pay taxes in the states where you are doing business" - Our business is run by 3 people, who are in two different states, completely on servers located in a third state, with customers from around the world. We have no physical office or address (though we will have to list an address so either one of our personal addresses or a Nevada PO Box or something might be used) and we have no presence in any state (print or other advertisements, in person services etc). So what state are we doing business in???

Majesty: Thank you for the info. but we don't have to worry about writing off losses, the business will be profitable 100% as our expenses are miniscule.

-DeathDonkey

Re: Lots of confusion about incorporation
 

I'd probably e-mail your states department of revenue and ask them. I did that with an e-commerce question about charging sales tax to fellow WI residents and they gave me a pretty good answer.



Under Wisconsin law, a Wisconsin sale takes place at the time and place
where tangible personal property or taxable services transfers from the
seller or the seller's agent to the buyer or the buyer's agent. When
property is transferred from a seller to a purchaser via a common carrier or
by the United States postal service, the property shall be deemed in the
possession of the purchaser when it is turned over to the purchaser or its
agent by the common carrier or postal service at the designation regardless
of the f.o.b. point and regardless of the method by which freight or postage
is paid.

If this change of possession occurs in Wisconsin, it is a sale subject to
Wisconsin sales or use tax. County or stadium tax may be collected depending
on this location.

If this change of possession occurs outside Wisconsin, it is not a sale
subject to Wisconsin sales and use tax.

If the item being shipped is subject to Wisconsin sales and use tax,
shipping and handling charges would also be taxable.


(Sucks for me because we have 5%, 5.5%, and 5.6% state sales tax rates depending on what county you live in...that requires me to add about 300 zip codes to my e-commerce software for all the areas that charge 5.5 or 5.6)

Re: Lots of confusion about incorporation
 

for easy stuff, www.legalzoom.com was awesome for us. We are in CA.

However, it sounds like your situation is a little more complicated. I would spring for an attorney. Prob cost you about 2-2.5k, but well worth it.

I have a good one in CA if you want a rec.