Californians - How are you running LLCs / S-Corps? Out of State?

[dsiomtw]

Looks like as long as I'm in CA, I'm paying it or taking too big of a risk. Or possibly have a relative own the business elsewhere, but I don't want to get into that.

Don't give up so easily. A couple of things you can do ...

1. If you have an Internet business headquartered in say Nevada, and most of your revenue comes from outside California, you should be fine even if you live in Cali and work remotely. For example if you're an affiliate and all your revenue comes from networks that aren't in California, you're fine. If you have an ecommerce site and most of your sales are to people that aren't in California, you should be fine, etc. etc. You'd want to talk to professionals for your own peace of mind.

2. Seriously consider using a C Corp. Just do your accounting properly so that at the end of the year your corporation's net income is roughly zero (i.e. all profits are paid to you via salary, paid out as expenses to other entities in other states, etc.) This is very simple stuff, and all you'd have to pay is the $800 franchise tax.

When you start making "good" money this isn't really even an issue. If you have a Cali LLC with revenues of 1-5 million, you only pay about ~6k in franchise taxes, which is peanuts. If your revenues are 500k or less it's only $900 plus the $800 or $1700 total. I don't know about you but it's not worth it to me to jump through a bunch of hoops and extra hassle just to save a few grand.

 

[eVandals]

Terrible implants.

 

[high risk]

you guys are all vaginas. maybe he makes 20m per year and just hates paying franchise taxes. maybe he wants to save that $800 to spend on blow and hookers. what the fuck do you care? he didn't ask "is $800 is a lot of money?", so stop telling him it's not.

i want an answer to this too -- can you incorporate in delaware/nevada without getting fucked? i'm registering my s-corp sometime this month; i'll be the first to admit i'm not super-ballin' and $800 is a lot of money to me, if i can avoid the franchise tax i'd like to, but the s-corp will save me more than $800, so i'm registering it either way, regardless of what state.

yes, but if you have nexus (business presence) in your "home" state (CA?) you'll need to pay taxes there too. hit me on AIM i can explain better

edit: gross boobs, btw.. can we get two boob icons? implants and real

 

[eliquid]

Depending on your haul, Malta and Seychelless are worth a look.

Very true, i like Seychelles because i heard ( need to check though ) that they have a non extradition rule with the us/canada

 

[WickedIce]

1. If you have an Internet business headquartered in say Nevada, and most of your revenue comes from outside California, you should be fine even if you live in Cali and work remotely. For example if you're an affiliate and all your revenue comes from networks that aren't in California, you're fine. If you have an ecommerce site and most of your sales are to people that aren't in California, you should be fine, etc. etc. You'd want to talk to professionals for your own peace of mind.

This is what I was hoping when I formed an LLC awhile ago but once I checked into it I found out that it would not work. If ANYTHING happens in CA they want their cut. It doesn't matter if your employees are in France, your servers are in China, and you don't sell to anyone in California, if you do anything that could be considered "conducting business" they will take their cut. CA really sucks if you own your own business and even after you leave they will try to get as much out of you as they can.

 

[FortressDewey]

We did our LLC in VA, relatively cheap. ~$150 a year. Might be worth looking into. Either way it's a PIA.

 

[ricdes]

Very true, i like Seychelles because i heard ( need to check though ) that they have a non extradition rule with the us/canada

you guys think its all easy as fuck to go offshore... wrong! once the IRS asks your affiliate network who is behind the offshore corp they are paying the monies to, you're fucked.

you'd be surprised how many times aff networks get auditted bc they are constantly getting paid by advertisers that are located offshore...

also, how are you going to back up your lifestyle? collect unemployment?

Offshore for resident US citizens is serious and very dangerous business nowadays. if you're travelling all year it's a different story.

 

[eliquid]

^^ i am traveling a lot

 

[eliquid]

you guys think its all easy as fuck to go offshore... wrong! once the IRS asks your affiliate network who is behind the offshore corp they are paying the monies to, you're fucked.

you'd be surprised how many times aff networks get auditted bc they are constantly getting paid by advertisers that are located offshore...

also, how are you going to back up your lifestyle? collect unemployment?

Offshore for resident US citizens is serious and very dangerous business nowadays. if you're travelling all year it's a different story.

Also, don't most aff network signup forms ask for business and personal name and whom to pay?

example signup:
EWA Private Network

I could signup with my real name, new email and new instant messanger and phone of my offshore business, offshore company name, offshore address, country, tax id of the offshore company, pay to offshore company , deliver via deposit, check or wire to offshore company bank located offshore as well. When the network calls me to verify, they all ask the same stupid questions about what you do, how you promote traffic, etc.

If the aff network got audited, all they would see is my name ( very common name, cant find me based on that alone ) and everything else in the offshore companies name/info. The audit on the network itself would be useless. They would have to audit the bank in said offshore companies name in the other country to ultimately tie it back to me.

Not saying the aff network couldn't cut me off for just being offshore, but plenty of affiliates are not in the US.

Also, you make your assumption that I only work with US based aff networks where the IRS has more control and also assume that affiliate marketing is all I do ( i.e. the backup my lifestyle quote ).

Im not saying its not hard or problematic, but its certainly doable for the right people. Also gaining dual citizenship with certain countries is not very hard if you really wanna work this angle as well.

 

[eliquid]

also need to mention, anyone doing this for tax evasion should not look into this.. my particular reason for looking offshore is for legal/anom. reasons

 

[ricdes]

Also, don't most aff network signup forms ask for business and personal name and whom to pay?

example signup:
EWA Private Network

I could signup with my real name, new email and new instant messanger and phone of my offshore business, offshore company name, offshore address, country, tax id of the offshore company, pay to offshore company , deliver via deposit, check or wire to offshore company bank located offshore as well. When the network calls me to verify, they all ask the same stupid questions about what you do, how you promote traffic, etc.

If the aff network got audited, all they would see is my name ( very common name, cant find me based on that alone ) and everything else in the offshore companies name/info. The audit on the network itself would be useless. They would have to audit the bank in said offshore companies name in the other country to ultimately tie it back to me.

Not saying the aff network couldn't cut me off for just being offshore, but plenty of affiliates are not in the US.

Also, you make your assumption that I only work with US based aff networks where the IRS has more control and also assume that affiliate marketing is all I do ( i.e. the backup my lifestyle quote ).

Im not saying its not hard or problematic, but its certainly doable for the right people. Also gaining dual citizenship with certain countries is not very hard if you really wanna work this angle as well.

agree. if you're travelling, its worth doing it. if not, you might be screwed sooner or later...

 

[eliquid]

^^ very true. I think the traveling out of the country is a big part of it

Mostly because if you travel a lot to say Brazil ( or any country ), it would make sense for you to have an offshore bank account for international money transfers/currency exchange etc. Traveling a lot out of the USA also helps establish that your not in the country most of the year as well/

These 2 things are very important in establishing citizenship in lot of other countries and also when things do possibly go wrong with IRS or offshore bank issues.

Again, I havent jumped into it fully myself, but I have talked to a lot of people and done a lot of research and am getting closer everyday.

I also would like to say that forming an offshore company is not illegal for US citizens, what is illegal is using the company to knowingly evade taxes. However, you can escape state taxes, reap the legal benefits of anonymity, and still hold money in your offshore corporation at a better tax rate ( generally 0 ) and use that money for yourself ( business expenses ) while in that country or offshore.

 

[dsiomtw]

This is what I was hoping when I formed an LLC awhile ago but once I checked into it I found out that it would not work. If ANYTHING happens in CA they want their cut. It doesn't matter if your employees are in France, your servers are in China, and you don't sell to anyone in California, if you do anything that could be considered "conducting business" they will take their cut. CA really sucks if you own your own business and even after you leave they will try to get as much out of you as they can.

My attorney says this is not correct. If the only thing you technically do in California is some work from your home, the IRS can't prove shit in order to collect. You can just tell them you travel a lot and don't do most or any of your work in Cali. The burden of proof is on them to prove otherwise, and they can't. If what you're saying is true that means any business owner with a company in Nevada, Delaware, etc. who lives in Cali would have to pay Cali franchise taxes just for checking his business email remotely from home, which is obviously not the case.

 

[eliquid]

i have heard as a general rule of thumb, the burden of proof when it involves the IRS always falls on you to prove your innocent which is why there is so much stress/hostility towards the IRS. If it were like you said, we would see many more examples of citizens defeating the IRS when it came to court cases about taxes, which I only know of 1 where someone actually won ( was a lawyer who defended himself with a loophole, which is now been closed )

I'm not a lawyer, and the burden of proof might be reversed for this type of scenario in regards to the IRS.. but I would for sure get a second opinion. I have heard conflicting stories from different CPA's and Lawyers on all kinds of issues for years on just about any subject matter, so best bet is to make sure by asking around and getting some proof.

Also, is the IRS the entity that collects the California franchise/state taxes anyway? If were talking about a state government and not really the IRS, then I would trust your lawyer. If were talking about a federal government program like the IRS though, just keep in mind this is the same entity that requires all US citizens to pay taxes on their personal income, even if you dont live in the US and have renounced your citizenship while aboard. If they gonna require something like that, you best be sure they will come for you if they have something worked out with California and your living there and collecting business income ( which I doubt ).

 

[cucaloco]

My attorney says this is not correct. If the only thing you technically do in California is some work from your home, the IRS can't prove shit in order to collect. You can just tell them you travel a lot and don't do most or any of your work in Cali. The burden of proof is on them to prove otherwise, and they can't. If what you're saying is true that means any business owner with a company in Nevada, Delaware, etc. who lives in Cali would have to pay Cali franchise taxes just for checking his business email remotely from home, which is obviously not the case.

I tried to get this setup, basically live in California and work in Nevada. The company I owned at the time had offices in Nevada and California. I would travel to the Nevada office every week.

Many people try this and the State of California pursues it very aggressively. If you do get audited they check where your home bank account is, where you withdraw money, where you eat out regularly, where you shop for groceries, etc.

Seemed like way too much of a hassle for the time and risk to me.

 

[eliquid]

I tried to get this setup, basically live in California and work in Nevada. The company I owned at the time had offices in Nevada and California. I would travel to the Nevada office every week.

Many people try this and the State of California pursues it very aggressively. If you do get audited they check where your home bank account is, where you withdraw money, where you eat out regularly, where you shop for groceries, etc.

Seemed like way too much of a hassle for the time and risk to me.

Sounds like the only way this could be done is to have your Nevada corp owned by several business partners while you draw a salary with dividend payments. Then it just appears as you live in Cali but work for a company in Nevada. Not feasible to most people, but if your really upset at paying ~6k in fran. taxes on 1-5 million rev, then it might be feasible for you ( based this figure on previous poster on here ).

Someone needs to tell me this.. is the fran. tax you pay this year deductible as a business expense for next year? If so, I dont see the point in complaining about such a low amount for the fran tax as it basically boils down to "cost of doing business" that ends up being a write off for next year ( if it does get to be a write off ).

Personally, I paid over 100k to my state in state taxes for 2009, adding 6k more really wouldn't be that much difference when all said and done if the figures from the prior poster in this thread are correct.

 

[high risk]

Personally, I paid over 100k to my state in state taxes for 2009, adding 6k more really wouldn't be that much difference when all said and done if the figures from the prior poster in this thread are correct.

As far as I know, the $800 is a minimum tax based on 8.84% corporate income tax rate for CA.

Limited Liability Company (LLC)

All LLCs classified as corporations that organize in California, register in California, conduct business in California, or receive California source income, must file California Form 100. The California Form 100 must be filed by the 15th day of the 3rd month after the close of the LLC’s taxable year.

The LLC will be taxed at the corporate tax rate of 8.84 percent and will be subject to a minimum tax of $800.

 

[eliquid]

ah, i see. Thanks for posting this ^^. So the way I read it if I am organized in Kentucky, do business in Kentucky, register in Kentucky, but collect income from California source, then I must file this as well? Good luck with that Cali.

 

[high risk]

ah, i see. Thanks for posting this ^^. So the way I read it if I am organized in Kentucky, do business in Kentucky, register in Kentucky, but collect income from California source, then I must file this as well? Good luck with that Cali.

I parse it that way also, but I've never been in the situation since all of my businesses have had presence in California.

That said, even if they were Nevada corps my attorneys have advised to follow the CA FTB's requirement of registering as a foreign business in CA. This is under great contention (many lawyers think it violates the 14th amendment), but in my situations it was decided it wasn't worth fighting due to the minimal income in these entities and the fact that one or more of their managers resided in CA.

You can see the actual relevant publication from the FTB here http://www.ftb.ca.gov/forms/misc/3556.pdf (PDF)

/not a lawyer

 

[dsiomtw]

i have heard as a general rule of thumb, the burden of proof when it involves the IRS always falls on you to prove your innocent which is why there is so much stress/hostility towards the IRS.

Well, we're talking about the CA FTB here not the IRS (or at least that's what I'm talking about).

If your entity is based in Nevada and for example you only collect commissions from affiliate networks that aren't in California, the burden would be on the CA FTB to prove that you are "doing business" in California.

And while it's what's important when it comes to income taxes, just because you live in Cali doesn't mean anything when it comes to franchise taxes. You could be doing your work when outside of California, 99% of your business could theoretically be run by virtual assistants, etc. etc. They can't say you are "doing business" in CA just because you might happen to check your business email in California once a day.

And even more importantly, at the end of the day it would cost them more to even try to do so than they would collect even if they did prove it (in most cases)

(This all assumes you do things "properly" of course)