united-states, startup-costs, taxes, incorporationI posted this question in the Personal Finance and Money StackExchange and I thought this would be a better place to post it. Here’s my question:
I am wanting to form an Inc for an internet website like Facebook or Twitter and I am running it out of my home for now. I would want to register my startup in the state of Delaware and I am in California.
I want to go with a company that says they will charge me for the submission the incorporation paperwork to form my company in DE, Delaware jurisdictional fees, registered agent fees.
My question is, beside paying them to do all of that for me, is there anything else I need to pay? Also what are some things I need to pay annually?
Also for taxes, how do I file and do taxes if my company is not making any revenue? And what are some other things I need to know about before forming my first business? Thanks.
I can only half answer - I don’t know enough about Delaware, but…
Commercial Taxes… there are sales taxes (if you sell online advertisements, or physical products, or you act as an agent for others who handle a product or a service) and there are corporate taxes (taxes on profits). If you don’t have sales, you won’t have profits and thus you will not need pay commercial taxes. If you do generate revenue, you need advice from a professional or else you’ll spend more time learning tax laws and filling in forms and less time growing your project into a profitable business.
Personal Taxes… If your company pays you a salary (because of your own cash investment into the business, or some other investors cash helping you) then you’ll need file personal taxes.
When it comes to taxes, don’t think you’ll outwit people who do tax for a living.
Lastly: Read points 1,2,3 and possibly 6 and 7 - The points should be considered even if you are not generating revenue - basically, if your service negatively impacts someone or some other business, you (or your company) could be held liable) https://startups.stackexchange.com/a/8585/7909
Best of luck!
I formed an LLC to legally protect my personal assets from the business in the event of a lawsuit. Consult an attorney to learn about how this does not always work. In my state filing the paperwork on the Secretary of State website was about $100 for 5 years. Although, it does need to be renewed every year to remain active.
Regarding Taxes
In a sole proprietor or a single member LLC, the income passes to the sole owner as personal income. This is probably the simplest option. You would not need to file any additional corporate taxes. Instead, you add a form to your personal taxes that shows what the business made or lost. This is called a Schedule C, just like a sole proprietor would use.
The Secretary of State in your state or in Delaware should have information and resources for you.
If you want the business to file its own taxes, you will need to file a form to convert the LLC to a Corp. Consult an accountant to see if there is any tax advantage for you to do this. I legally have an LLC but file tax as an S-Corp with the IRS.
Legally, it is more work to have a corp than it is to have an LLC or a sole prop.
Fees
Each state will have different filing fees and renewal fees. In addition, there are annual steps they may require you to take. Such as filing annual meeting minutes. A tax accountant can sometimes do this for you in addition to helping with taxes. There are services out there that will do it for you as well.
Good Luck.
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