legal, taxes, e-commerceMe and my partner are running a political entertainment/news website + Facebook and Twitter. I am both the back end and front end web developer as well as social media strategist (I edit videos, but I don’t create content, just provide analytics on ways to increase share rates and understand our audience background). Our page is at 32k likes at the moment, and my partner (who is the personality of the site, creates content, writes/outsources articles etc.) and I agree we need an LLC to protect us. He is in his an adult living with his wife in Pennsylvania, I live with my grandma (a temporary setup) in Texas, and My mother lives in Kansas. I say this because I’m a minor (17).
Which state would be best to form the LLC in? For tax purposes and any other things I should consider.
Form the LLC in Pennsylvania to keep it simple.
For an LLC, in addition to creating it, you need to register it in states where you are doing business. If you create the LLC in, say, Delaware, you will need to register it in Pennsylvania anyway. To minimize your fees and paperwork, create the LLC in a state where you are doing business, therefore Pennsylvania.
Later on, when you are making lots of money, you can optimize for taxes. Until then, you are putting the cart before the horse…
(I don’t know offhand if you need to register your LLC in Texas and/or Kansas, but you’ll need to look into that.)
You can open a Limited Liability Company where you want, but you will pay taxes were you are resident.
It is important that you understand the legal consequences of opening a company and the legal differences between the same actions conducted with different companies. I am not an expert on US Commercial Law, but in Italy you have simple companies and limited liabilities companies. LLC in Italy have capital requirement, for ex you need to have 10% of you Assets as Capital. This mean that if your Assets are 10.000 Euros you will need 1000 Euros of Cash/Capital for the company. This is because when you get funding/investment/loans, you will be responsible only for the 1000 Euros with which you founded your company.
For taxation, my opinion is that you pay taxes where you live, where you have your fiscal residence. Check the rules for determining your fiscal residence. You have to be registered somewhere as resident and based on the number of days you live there you are considered resident or not.
Then your company will pay taxes where it is registered, usually companies pay taxes on net profit. So not on the earning they have but on the earning - expenses for that year.
Based on the amount of shares that you have you will get dividends, but I think you may have to pay additional taxes if you are resident in another state.
If i am not wrong you will have to write a document to the Tax Authorities every year where you state your income/earning as a person (not corporation/business), there you can input your wage, but also earning from other activities like this corporation and you will be taxed based on that..
Also take in consideration the risk of having a company, especially if your partner takes loans, mortgages, credit cards, investors … etc…
Technically the CEO will take responsibility for the actions of the company, and the CFO also, if in case of Bankruptcy the Accounting Data was faked.
Good luck and ask me more, I don’t know much, but I studied accounting
All content is licensed under CC BY-SA 3.0.