[Cruisen_Chubby]

Hey fellas,

Seeing that many people on here are small business owners or are at least familiar with going their own way and thinking about starting a business, I figured this would be a good place to ask:

My roommate and I are starting a small business. We would like to create an LLC (taxed like an S-Corporation).

We live in Minnesota but we hear a lot about Nevada/Delaware in terms of favorable incorporation oversight and laws.

From what I have read, Delaware is more catered towards C-Corps (who need external financing in terms of equity)- so I am leaning towards Nevada. At this point, I am even open to the idea of moving out to Nevada (Vegas) as I have some other pending job offers.

Long story short - How should I go about incorporating and it is worth it to pursue a Nevada LLC? Should I use an agent or should I go it myself?


Thanks in advance!

[WestIndianArchie]

Depends on
- where you do business
- type of business
- how much revenue currently
- case law in various States
- where your would be plaintiffs are
- money you are willing to spend
- tax situation

it's a fairly complicated endeavor followed by simple documents.

WIA

[lurker]

Favorable incorporation oversight and laws are a lot more important to you when you're a multinational corporation seeking to buttfuck its minority shareholders on a questionable dividend/nonhostile takeover scheme than when you're a small business owner.

You should incorporate or organize (LLC term) in the state you're going to run the business in, with one exception: if the business is going to do business in different states, you pick one to initially organize in and then register the company as a foreign entity in the others. Note that this means you have to pay multiple annual fees: once for the state of incorporation/organization, and again for each state in which you want to register.

The other consideration is the business tax climate. I don't know anything about MN business taxes. CA, for instance, has a minimum franchise tax and a gross receipts tax for LLCs that make them much less favorable vehicles. NV doesn't tax entities as far as I can remember beyond the franchise yearly fee.

If you move to Vegas you don't need an agent. An agent means a "resident agent" and is somebody physically located in the state for service of process. If you're in Vegas, that's you. If you're out of state, you use a resident agent.

Doing the paperwork to organize a company yourself is easy. You want to hire a lawyer anyway, however, because drafting an operating agreement between you and your roommate is a pain in the ass with potential nasty repercussions if things go sour. And things can go sour more easily than you think.

The right lawyer should charge you between $1500 and $3k for everything to get the company up and running smoothly. Under 1500 and you probably have a shitty lawyer. Over 3k and you're overpaying.

*Nothing herein creates an attorney-client relationship between us.*

[Cruisen_Chubby]

Thanks for the quick replies

(07-30-2013 10:42 AM)WestIndianArchie Wrote:  

Depends on
- where you do business
It's going to be an online business, so potentially multiple states. To make the accounting easy we will book the revenue to the point of sale (the state in which we do business, which may be MN the first year and NV the next and following years)

- type of business

Tax Accounting. Could be considered a PSC but we are choosing to organize and be taxed as an S-Corp (conduit).
- how much revenue currently

$0 - this will be our first year
- case law in various States
- where your would be plaintiffs are

As mentioned before, this could be in any jurisdiction as we will be doing business online and interstate commerce will indeed happen.
- money you are willing to spend

Whatever needs to be spent to have it done correctly and efficiently.
- tax situation

We will "check the box" , if you will, to be taxed and set up as an -corporation, therefore the profits and the reasonable salaries will flow through to our individual 1040's. We will have 50/50 stock ownership and will contribute the matching amount of capital every time a monetary contribution is necessary, therefore having the same internal and external basis in the company.

it's a fairly complicated endeavor followed by simple documents.

I'm beginning to see this - I appreciate the help more than you can imagine.

WIA

(07-30-2013 10:48 AM)lurker Wrote:  

Favorable incorporation oversight and laws are a lot more important to you when you're a multinational corporation seeking to buttfuck its minority shareholders on a questionable dividend/nonhostile takeover scheme than when you're a small business owner.

You should incorporate or organize (LLC term) in the state you're going to run the business in, with one exception: if the business is going to do business in different states, you pick one to initially organize in and then register the company as a foreign entity in the others. Note that this means you have to pay multiple annual fees: once for the state of incorporation/organization, and again for each state in which you want to register.

That makes sense. For the first year, for simplicity's sake, we may end up doing business out of Minnesota. I would; however, like to move out to Las Vegas as there is a pretty big demand for tax accountants there (gambling winning/losses, etc.), therefore, it may be wise to incorporate in NV and pay the MN fee for the first year.

For the years thereafter, I'm wondering if we'd even need to file the out of state fees. Technically, we won't have offices in any state other than the one we are operating in. We can then book all the revenue to the point of sale (NV). It would essentially be the clients coming to us for services (via the internet).

We were looking to move to NV, FL, or TX as they have no state income tax and we plan to organize as a conduit (S-Corps aren't taxed per se but earnings flow through to the shareholders on a personal level). At this point with thinking about incorporating in NV and me wanting to live in Vegas- I'm sure that will be our principle place of business.

I don't feel like living in a high state income tax state to subsidize the gays getting married here. They are also considering imposing a tax on professional services (accounting, law, etc.) - as you can guess, that would be us up pretty good. No thank you.



The other consideration is the business tax climate. I don't know anything about MN business taxes. CA, for instance, has a minimum franchise tax and a gross receipts tax for LLCs that make them much less favorable vehicles. NV doesn't tax entities as far as I can remember beyond the franchise yearly fee.

Moving to Nevada and organizing as an S-corp (non-franchise) would eliminate these problems.

If you move to Vegas you don't need an agent. An agent means a "resident agent" and is somebody physically located in the state for service of process. If you're in Vegas, that's you. If you're out of state, you use a resident agent.

ok, makes sense. We just may need one for the first year unless we decide to move out there right away.

Doing the paperwork to organize a company yourself is easy. You want to hire a lawyer anyway, however, because drafting an operating agreement between you and your roommate is a pain in the ass with potential nasty repercussions if things go sour. And things can go sour more easily than you think.

The right lawyer should charge you between $1500 and $3k for everything to get the company up and running smoothly. Under 1500 and you probably have a shitty lawyer. Over 3k and you're overpaying.

*Nothing herein creates an attorney-client relationship between us.*

Thanks for your guys' help on this. It's confusing enough as is but it's always nice to get answers from people who have "been there".

[RexImperator]

http://www.legalzoom.com/

^^^Cheaper than a lawyer. They can also set up an agent for you.

[DirectDanger]

Do not use legalzoom or any other all in one bullshit service. Pay the extra $$ for a proper lawyer to do it for you so you can sit down and get all the details in order. A few extra hundred dollars today can save you from headaches in the future.

[Cruisen_Chubby]

Does anyone know what the differences would be if I created an LLC that is to be taxed as an S-Corp as opposed to just creating an S-Corp itself?

All this shits getting confusing. I feel like a lot of these one and done companies are just out to make a quick buck and then hide when shit hits the fan.

[sammybiker]

How about you start a simple sole prop or partnership, beat the odds and get a profitable business off the ground before concerning yourself with scorp formations?

[Dr. Howard]

(07-30-2013 01:47 PM)Cruisen_Chubby Wrote:  

Does anyone know what the differences would be if I created an LLC that is to be taxed as an S-Corp as opposed to just creating an S-Corp itself?

All this shits getting confusing. I feel like a lot of these one and done companies are just out to make a quick buck and then hide when shit hits the fan.

you guys are going to do tax accounting and yet are perplexed by incorporation? If it was me I'd focus on finding an old tax accountant that is looking to retire and work for him using part of my salary as part of a buyout deal. That way I could get some training wheels for the first couple of years and can fish for clients in Nevada, bring them into the company and then have them ready for when I took over.

edit: ha, there's even a minneapolis tax accounting business for sale right now http://www.natptax.com/AboutNATP/Adverti...rSale.aspx

[Cruisen_Chubby]

(07-30-2013 02:26 PM)sammybiker Wrote:  

How about you start a simple sole prop or partnership, beat the odds and get a profitable business off the ground before concerning yourself with scorp formations?

We can't do a sole prop because we have two people. We also don't want to do a partnership as to avoid the unnecessary self-employment tax.

As an S-Corp we'd pay FICA on our W-2 wages but the Net income would only be subject to income tax.

[lurker]

(07-30-2013 11:31 AM)Cruisen_Chubby Wrote:  

For the years thereafter, I'm wondering if we'd even need to file the out of state fees. Technically, we won't have offices in any state other than the one we are operating in. We can then book all the revenue to the point of sale (NV). It would essentially be the clients coming to us for services (via the internet).

Yes, you do. Well, sort of. Here's how it works. If I sue you in my state, and you've been doing business there, I'm going to check your registration first. If you aren't current as a registered foreign entity, you can't defend yourself in my state's court. Then I win our lawsuit. Pro legal advice, distilled: you want to win your lawsuit.

(07-30-2013 11:31 AM)Cruisen_Chubby Wrote:  

Moving to Nevada and organizing as an S-corp (non-franchise) would eliminate these problems.

The "franchise" is what the state calls your entity. It doesn't mean you're a franchised business in the sense of an independently owned chain store.

(07-30-2013 01:09 PM)RexImperator Wrote:  

http://www.legalzoom.com/

^^^Cheaper than a lawyer. They can also set up an agent for you.

NEVER do this. Disclosure: Yes, I'm an entrepreneurial business lawyer. Yes, LegalZoom theoretically takes money out of my pocket. However, it doesn't take any of the smart money, or good clients. Only the ones dumb and cheap enough to use LegalZoom.

(07-30-2013 01:35 PM)DirectDanger Wrote:  

Do not use legalzoom or any other all in one bullshit service. Pay the extra $$ for a proper lawyer to do it for you so you can sit down and get all the details in order. A few extra hundred dollars today can save you from headaches in the future.

Remember what I posted earlier:

"Doing the paperwork to organize a company yourself is easy. You want to hire a lawyer anyway, however, because drafting an operating agreement between you and your roommate is a pain in the ass with potential nasty repercussions if things go sour. And things can go sour more easily than you think."

LegalZoom will not protect your interests against your business partner, or, at best, will give you a form agreement that doesn't reflect your business needs.

You're not paying people like me to fill out a form. You're paying me to know what the form means and fix it so it doesn't fuck you over.

(07-30-2013 01:47 PM)Cruisen_Chubby Wrote:  

Does anyone know what the differences would be if I created an LLC that is to be taxed as an S-Corp as opposed to just creating an S-Corp itself?

You get LLC administrative treatment combined with S-Corp tax treatment. The main advantage of the former is that LLCs are significantly easier to administer and less of a pain in the ass to set up.

The main advantage of the latter is that you can structure distributions as dividends instead of self-employment wages and avoid some FICA and SS tax.

(07-30-2013 02:26 PM)sammybiker Wrote:  

How about you start a simple sole prop or partnership, beat the odds and get a profitable business off the ground before concerning yourself with scorp formations?

Never do this. Entities are there to protect you from the liabilities your business may incur. Why accept unlimited personal risk when you can eliminate it for a couple thousand dollars upfront and another couple hundred each year in fees, paperwork, and attorney time?

[Cruisen_Chubby]

[quote] (07-30-2013 08:27 PM)lurker Wrote:  

[quote='Cruisen_Chubby' pid='501767' dateline='1375201876']

Yes, you do. Well, sort of. Here's how it works. If I sue you in my state, and you've been doing business there, I'm going to check your registration first. If you aren't current as a registered foreign entity, you can't defend yourself in my state's court. Then I win our lawsuit. Pro legal advice, distilled: you want to win your lawsuit.

Let's say that we are doing business online. Our clients can be from any state, but we are located in Nevada. Wouldn't this considered doing business in Nevada? We would have no physical offices anywhere else. Otherwise the commerce falls in the interweb.


The "franchise" is what the state calls your entity. It doesn't mean you're a franchised business in the sense of an independently owned chain store.

Thanks for clearing that up.



Remember what I posted earlier:

"Doing the paperwork to organize a company yourself is easy. You want to hire a lawyer anyway, however, because drafting an operating agreement between you and your roommate is a pain in the ass with potential nasty repercussions if things go sour. And things can go sour more easily than you think."

LegalZoom will not protect your interests against your business partner, or, at best, will give you a form agreement that doesn't reflect your business needs.

You're not paying people like me to fill out a form. You're paying me to know what the form means and fix it so it doesn't fuck you over.

Exactly. The organizational costs we can deduct up the $5,000 the first year of business and amortize the rest over 180 months (15 years). It'd be worth our time to have it done.

[quote='Cruisen_Chubby' pid='501864' dateline='1375210064']
Does anyone know what the differences would be if I created an LLC that is to be taxed as an S-Corp as opposed to just creating an S-Corp itself?[/quote]

You get LLC administrative treatment combined with S-Corp tax treatment. The main advantage of the former is that LLCs are significantly easier to administer and less of a pain in the ass to set up.

The main advantage of the latter is that you can structure distributions as dividends instead of self-employment wages and avoid some FICA and SS tax.

This is the part I'm getting confused one. So if we went ahead with the LLC (to be taxed like an S-Corp) - We wouldn't be available to structure the distributions as dividends? You would think that being taxed similar to an S-Corp that you could have the same pay structure as the S-Corp. This right here, is my main problem right now.

In the beginning it won't matter much, but as revenues climb we're talking some significant tax savings. That along with an accountable plan to squander some money out of the middle (the expenses).

[Cruisen_Chubby]

Yes, you do. Well, sort of. Here's how it works. If I sue you in my state, and you've been doing business there, I'm going to check your registration first. If you aren't current as a registered foreign entity, you can't defend yourself in my state's court. Then I win our lawsuit. Pro legal advice, distilled: you want to win your lawsuit.

Let's say that we are doing business online. Our clients can be from any state, but we are located in Nevada. Wouldn't this considered doing business in Nevada? We would have no physical offices anywhere else. Otherwise the commerce falls in the interweb.


The "franchise" is what the state calls your entity. It doesn't mean you're a franchised business in the sense of an independently owned chain store.

Thanks for clearing that up.



Remember what I posted earlier:

"Doing the paperwork to organize a company yourself is easy. You want to hire a lawyer anyway, however, because drafting an operating agreement between you and your roommate is a pain in the ass with potential nasty repercussions if things go sour. And things can go sour more easily than you think."

LegalZoom will not protect your interests against your business partner, or, at best, will give you a form agreement that doesn't reflect your business needs.

You're not paying people like me to fill out a form. You're paying me to know what the form means and fix it so it doesn't fuck you over.

Exactly. The organizational costs we can deduct up the $5,000 the first year of business and amortize the rest over 180 months (15 years). It'd be worth our time to have it done.

(07-30-2013 01:47 PM)Cruisen_Chubby Wrote:  

Does anyone know what the differences would be if I created an LLC that is to be taxed as an S-Corp as opposed to just creating an S-Corp itself?

You get LLC administrative treatment combined with S-Corp tax treatment. The main advantage of the former is that LLCs are significantly easier to administer and less of a pain in the ass to set up.

The main advantage of the latter is that you can structure distributions as dividends instead of self-employment wages and avoid some FICA and SS tax.

This is the part I'm getting confused one. So if we went ahead with the LLC (to be taxed like an S-Corp) - We wouldn't be available to structure the distributions as dividends? You would think that being taxed similar to an S-Corp that you could have the same pay structure as the S-Corp. This right here, is my main problem right now.

In the beginning it won't matter much, but as revenues climb we're talking some significant tax savings. That along with an accountable plan to squander some money out of the middle (the expenses).