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wordybob
05-14-2010, 09:59 AM
Hi all,

I'm in the planning stages of starting a consulting firm with a partner and have a few questions I'm hoping you may be able to help with.

We are planning to offer corporate training/ web design/ social media marketing type services. The vast majority of the business would be conducted online. However, we would also like to have the option of conducting in-person training sessions. The potential exists for us to do business with clients nationwide.

The most difficult decision we seem to face at this point is where and how to incorporate. I live in Florida and my partner lives in Pennsylvania. I've been researching the requirements for incorporation in Nevada, Florida, and Pennsylvania. My preference is Nevada, due to the anonymity, as I am a professor, but some colleges frown on their faculty having outside business interests, so I would like to keep the consulting firm as anonymous as possible, at least until we can find out whether we can make a go of it.

From what I've been reading thus far, I'm leaning towards a LLC vs. an S corporation. However, should we incorporate in Nevada, it appears that we may be required to obtain a registered agent in Nevada, and also register as a foreign company in both PA and FL. Would that be correct? How would the nature of the business as an online one affect the state(s) in which we would incorporate, if at all?

I would greatly appreciate any information or advice that you may be able to offer!

phanio
05-14-2010, 11:47 AM
You are right on all points - you can register in NV - but will probably also have to file foreign status in the states that you have offices or conduct in person business. Each state just wants to make sure they get a piece of your pie.

Do know that when registering in the states – you might be only required to use your partner’s name – thus keeping you anonymous. Just have an outside agreement partnership pertaining to you and your partner.

I am a fan of LLCs – They offer the same protection as c-corps and s-corps but without all the hassle and taxable income pass through just like an s-corp. but, I tend to like them better – less overall hassle – just my opinion – you should sit down with a cpa to determine what is best for your personal situation.

Not to promote any one company – but have you looked into the firms that help people form their organizations in other states. Most offer register agent services and can quickly set up your organization in all the states you need – including the primary and foreign.
There are only two real values, in my opinion, in setting up your company in another state – that is taxes and managerial requirements. Delaware has been popular for decades because it had low tax requirements and really did not require much from the business other than paying taxes – like additional reporting or managerial requirements. Nevada is like that now.

Some states have no personal income tax – but have corporate taxes or franchise taxes. Some, like TN – only tax capital gains.

What you should do is address it from a personal prospective. Find out the costs – both money and time – as well as the tax burden – of each state you are considering – then choose the one that will be most beneficial to you and your partner.

Best of luck to you – let us know what you decide and how it turns out.

owelesstax
05-14-2010, 10:10 PM
Sometimes you can't always trust what is posted anonymously on line.

For example:

You are right on all points - you can register in NV - but will probably also have to file foreign status in the states that you have offices or conduct in person business. Each state just wants to make sure they get a piece of your pie.

Do know that when registering in the states – you might be only required to use your partner’s name – thus keeping you anonymous. Just have an outside agreement partnership pertaining to you and your partner..

The more accurate statement would be that you will be required to file in every state in which you have operations, and that you'll have to "Hold yourself out to do business" in every state in which you register. Just because you live in Florida as a Stockholder does not mean the corporation needs to file there, nor in PA, if the only tie to the state is an owner living there. But you could be required if you have an Address, bank account, telephone, or employees (employees might not be owners and owners might not be employees). As an online business you have the right to domicile your corporation whereever it is most advantageous. You simply are required to follow the rules.

As to anonymity. . . Privacy is often over played when it comes to Nevada, or most other states. Whilethe state of Nevada does not keep a record of stockholders of an s-corp, the IRS will. On the tax return you will be required to declare ALL stockholders. Were you planning to be a signer on the bank account? Then, you're not anonymous. While I realize that for your purposes those may not be important points, others read these generalized statements and assume they actually apply to them.


I am a fan of LLCs – They offer the same protection as c-corps and s-corps but without all the hassle and taxable income pass through just like an s-corp. but, I tend to like them better – less overall hassle – just my opinion – you should sit down with a cpa to determine what is best for your personal situation..

LLCs actually have not "Proven" to limit liability, they merely claimed it, and in fact their sole reason for existence is to replace the Limited Partnership that originally claimed to limit liability, but when tested, failed. If they had actually worked they would be popular today. LLCs have not been doing so well in the "Proving" department and many states will now allow you to set up LLPs, or even LLLPs, neither of which have been tested.

As to the "Hassle", you will not find a single "credible" source that will tell you that business formalities and compliance are not necessary in an LLC. In fact the most well respected sources will admit that the standard of record keeping must be set higher in the case of the LLC, since there is no court precedence to rely upon as a "High enough" point.

When making a recommendation for Business Entity, I think it important to realize that anyone that makes a generalized, one size fits all statement probably does know enough to trust.

Having been in this business for over 25 years, it has become painfully obvious that most ofo the recommends to be an LLC or an S-corp, or some type of LP, have been based upon some flawed assumptions.


There are only two real values, in my opinion, in setting up your company in another state – that is taxes and managerial requirements. Delaware has been popular for decades because it had low tax requirements and really did not require much from the business other than paying taxes – like additional reporting or managerial requirements. Nevada is like that now.



I agree that taxes are the single largest cost to many successful businesses and are worth managing. But Delaware and Nevada are not similar. Delaware has focused on Publicly Traded Companies. Their Statutes are written to the benefit of such companies and that is why they loudly proclaim that a majority (percentages change) of the Fortune 500 companies are all registered in Delaware. If you are intending to be publicly traded, it might be worth considering.

Nevada has always focused on privately held companies, and has written its statutes for their benefit.

It cannot be stated that Nevada is the solution to every problem from taxes to acne, it really requires that YOU understand what they details are.

If you are going to get advice from an accountant, CPA or otherwise, try and find a Competent one. One that doesn't recommend a structure that is "designed for failure", if you are going to be successful.

Taxes are LOWER in a real corporation.