[jamaicabound]

Okay, so without getting into too many specifics I'm wondering about the legality and such of running a business in one state and living in another.

Long story short my state is very unfrieendly to business. I have a successful business but was issued a Cease and Desist by the state. I'm looking to move my business into another state which does not regulate my industry. We are kind of an ecommerce business so we ship items.

I'm sure I could probably get away with moving the business to another state on paper and just running it from my state and shipping from my state but I don't think thats necessarily the proper or legal way to do things. Also, ultimately my items would be shipping from my state even though the business is based in another.

As a workaround I was considering starting a new LLC in my state which is a shipping and order fulfillment company, moving my other business out of state and basically paying this order fulfillment company to ship my orders so my company in state isn't subject to regulation and isn't in the industry which is regulated but myself and my partner and continue operating our business without having to move. Basically nothing about how my business runs or where its located would really change, I would simply be trying to kind of skirt around the law by having like a regis office in another state, doing my banking there but essentially continuing to live and work out of my state but hoping that by having a seperate company technically I'm not operating a business in a regulated industry out of my state but out of another state but running a shipping business out of my state.

Sorry I know kinda complicated and vague

I know Amazon has done some clever things moreso to avoid taxes than regulation but wondering if anyone has ever done anything similar or if anyone knows if a strategy like this would work. I know there's a lot of really bright people on here so any assistance would be greatly appreciated.

[Dr. Howard]

I know two businesses that operate as you describe with order fulfillment done somewhere else. You are going to have to pay a corporate or tax attorney to tell you how to do this in your specific case at it will be specific to a) your business b) the state you are in now c) the state you are going to be in.

[Richiavelli]

You s3llin drugz brah?

I'd probably go to a lawyer, I'm unsure how you would solve this. I personally cannot speak to the legal side.

This does create a tax problem though - you will most likely will have apportion any income you have to both the state you work in (apportionment based on employees) and the state that logistics/leases/shipping is being done in due to Nexus. Not sure if this is possible, but I'd recommend Florida as there is no state tax. You would only need to fill out an informational form.

[anonymous123]

I've dealt with this. If you are small, you can likely deal with this by using a good tax CPA. If starting to generate the kind of revenues and profitability that gets attention of IRS you will need a tax lawyer in addition to a tax CPA (lawyer for memo, CPA keeping you in compliance with memo). If you go big, then you need to tack on a transfer pricing memo and get your operations to sync up with the memo (but if you get here you are nails and won't be asking anyone but your trusted advisors for advice).

Or you can simplify life and do the unthinkable and move away from the Social Republic of California. (I know it is hard...but the fact that you have to find a workaround in the first place is telling for the lousy business environment that is California).

[jamaicabound]

(03-02-2014 05:03 PM)anonymous123 Wrote:  

I've dealt with this. If you are small, you can likely deal with this by using a good tax CPA. If starting to generate the kind of revenues and profitability that gets attention of IRS you will need a tax lawyer in addition to a tax CPA (lawyer for memo, CPA keeping you in compliance with memo). If you go big, then you need to tack on a transfer pricing memo and get your operations to sync up with the memo (but if you get here you are nails and won't be asking anyone but your trusted advisors for advice).

Or you can simplify life and do the unthinkable and move away from the Social Republic of California. (I know it is hard...but the fact that you have to find a workaround in the first place is telling for the lousy business environment that is California).

We started the business from nothing like $360. First few months were small, then was making 3k-5k a month nice side money but not anything huge. Last 6 months have been consistantly 15k to 20k a month so starting to make some serious money so will probably need a lawyer.

Obvoiusly tax concerns are important but I'm more concerned with money transmitter laws, kinda like the stuff that Bitcoin guy Charlie Schrem wound up getting in trouble for. Basically some states don't regulate money transmitters at all, others do but exclude certain industries from falling under their definition of a money transmiter.

My main concern isn't taxes so much as officially operating my business out of a state which doesn't regulate it while still maintaining residency and being able to run the business from my home state. Thanks to those who commented, I appreciate the advice.

[worldwidetraveler]

The main problem is you will be running the company from the state you are in now. That means there is nexus in that state. I know there are tax implication, but I wouldn't know about how it impacts regulations wise.

The state can say you really run the business from there since you live there regardless if you move it out of state. Lawyer up.

[jamaicabound]

(03-03-2014 10:01 AM)worldwidetraveler Wrote:  

The main problem is you will be running the company from the state you are in now. That means there is nexus in that state. I know there are tax implication, but I wouldn't know about how it impacts regulations wise.

The state can say you really run the business from there since you live there regardless if you move it out of state. Lawyer up.

Yeah taxes will come into play but I think the bigger issue is what my state constitutes as doing business in my state. It seems most states dont explicitly state that doing banking in the state means your doing business here or holding a meeting here doesn't necessarily mean your doing business here. The one thing that definately does is doing sales in a state which is why I had the idea of a workaround of my business out of state actually takes the sales, my seperate business in the state is just does order fulfillment but doesn't engage in sales or anything else. Basically we pay a seperate business owned by us to ship our orders so really its a shiipping busines in my state and not a regulated industry. All that said my state is known for basically trying to say anything is doing business in the state so they can extort some money out of you.

I thought of this initially becaues amazon does some clever things to avoid state taxes and union stuff, I imagine I'd need a good lawyer to set something like this up if it can even be done.

[worldwidetraveler]

(03-03-2014 10:47 AM)jamaicabound Wrote:  

(03-03-2014 10:01 AM)worldwidetraveler Wrote:  

The main problem is you will be running the company from the state you are in now. That means there is nexus in that state. I know there are tax implication, but I wouldn't know about how it impacts regulations wise.

The state can say you really run the business from there since you live there regardless if you move it out of state. Lawyer up.

Yeah taxes will come into play but I think the bigger issue is what my state constitutes as doing business in my state. It seems most states dont explicitly state that doing banking in the state means your doing business here or holding a meeting here doesn't necessarily mean your doing business here. The one thing that definately does is doing sales in a state which is why I had the idea of a workaround of my business out of state actually takes the sales, my seperate business in the state is just does order fulfillment but doesn't engage in sales or anything else. Basically we pay a seperate business owned by us to ship our orders so really its a shiipping busines in my state and not a regulated industry. All that said my state is known for basically trying to say anything is doing business in the state so they can extort some money out of you.

I thought of this initially becaues amazon does some clever things to avoid state taxes and union stuff, I imagine I'd need a good lawyer to set something like this up if it can even be done.

I don't believe where you do your banking comes into play. At least from the research I did on foreign companies.

What does come into play is if you are doing day to day operations from your home state. That is what constitutes nexus from my understanding.

Say you live in Cali but have a company in Nevada. If you do day to day business operations from your home, in Cali, then you have nexus in Cali. Now if you stayed in Nevada during the week and traveled back home to Cali you would be able to dispel the nexus argument.

Again, this if just from my understanding.

Amazon and a lot of the tech companies have offices in the states they are licensed. Amazon was getting hit with nexus in states that had affiliates sending traffic for commissions.

[jamaicabound]

(03-03-2014 10:52 AM)worldwidetraveler Wrote:  

(03-03-2014 10:47 AM)jamaicabound Wrote:  

(03-03-2014 10:01 AM)worldwidetraveler Wrote:  

The main problem is you will be running the company from the state you are in now. That means there is nexus in that state. I know there are tax implication, but I wouldn't know about how it impacts regulations wise.

The state can say you really run the business from there since you live there regardless if you move it out of state. Lawyer up.

Yeah taxes will come into play but I think the bigger issue is what my state constitutes as doing business in my state. It seems most states dont explicitly state that doing banking in the state means your doing business here or holding a meeting here doesn't necessarily mean your doing business here. The one thing that definately does is doing sales in a state which is why I had the idea of a workaround of my business out of state actually takes the sales, my seperate business in the state is just does order fulfillment but doesn't engage in sales or anything else. Basically we pay a seperate business owned by us to ship our orders so really its a shiipping busines in my state and not a regulated industry. All that said my state is known for basically trying to say anything is doing business in the state so they can extort some money out of you.

I thought of this initially becaues amazon does some clever things to avoid state taxes and union stuff, I imagine I'd need a good lawyer to set something like this up if it can even be done.

I don't believe where you do your banking comes into play. At least from the research I did on foreign companies.

What does come into play is if you are doing day to day operations from your home state. That is what constitutes nexus from my understanding.

Say you live in Cali but have a company in Nevada. If you do day to day business operations from your home, in Cali, then you have nexus in Cali. Now if you stayed in Nevada during the week and traveled back home to Cali you would be able to dispel the nexus argument.

Again, this if just from my understanding.

Amazon and a lot of the tech companies have offices in the states they are licensed. Amazon was getting hit with nexus in states that had affiliates sending traffic for commissions.

This stuff all gets very confusing and it seems much is left up to interpretation but here's what I found...

ACTIVITIES THAT DO NOT CONSTITUED TRANSACTING BUSINESS IN ILLINOIS CORPORATIONS
(Pursuant to the Illinois Business Corporation Act of 1983)

1. Maintaining, defending or settling any proceeding;
2. Holding meetings of the board of directors or shareholders or carrying on other activities concerning internal corporate affairs;
3. Maintaining bank accounts;
4. Maintaining offices or agencies for the transfer, exchange, and registration of the corporations own securities or maintaining trustees or depositaries with respect to those securities;
5. Selling through independent contractors;
6. Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if orders require acceptance outside the State before they become contracts;
7. (blank)
8. (blank)
9. Owning, without more, real or personal property;
10. Conducting an isolated transaction that is completed within 120 days and that is not one in the course of repeated transactions of a like nature; or
11. Having a corporate officer or director who is a resident of this State.

ACTIVITIES THAT DO NOT CONSTITUED TRANSACTING BUSINESS IN ILLINOIS LLC'S
(Pursuant to the Illinois Limited Liability Company Act)

1. Maintaining, defending or settling any proceeding;
2. Holding meetings of the managers or members or carrying on other activities concerning internal company affairs;
3. Maintaining bank accounts;
4. Maintaining offices or agencies for the transfer, exchange, and registration of the limited liability company’s own securities or maintaining trustees or depositaries with respect to those securities;
5. Selling through independent contractors;
6. Soliciting or obtaining orders, whether by mail or through employees or agents or otherwise, if orders require acceptance outside the State before they become contracts;
7. Owning, without more, real or personal property;
8. Conducting an isolated transaction that is completed within 120 days and that is not one in the course of repeated transactions of a like nature; or
9. Having a member or manager who is a resident of this State.

ACTIVITIES THAT ABSOLUTLY REQUIRE QUALIFICATION IN ILLINOIS

This list is a general representative of the activities conducted in a foreign state that are sufficiently regular, systematic, extensive and continuous to trigger the qualification requirements in most states:

1. Accounting;
2. Advertising;
3. Banking;
4. Construction;
5. Sales; and
6. Third Party Sales.