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gettingstarted 9th April 2006 05:54 PM

Best state to file/operate Internet Business

I'm starting a business that will sell digital products and services over the web. I'm trying to determine where best to file an LLC. One of the goals of starting a business that is completely operated over the internet is to free myself up to move - I live in Wisconsin now but will be moving to Canada in August. I'm hoping it's possible to use the Internet such that my business operates out of 1 state, no matter where I, as the owner, am located. I would just pay taxes as a non-resident in the state of incorporation and claim a credit on my Wisconsin personal tax form while in the US. Is this possible?

Here are some of the questions I'm playing with:

1) Do I need a physical mailing address in the state of incorporation in order to also allow it be the state of operation? Or can a registered agent fill that need, so that the business not actually need have a separate physical location?

2) Assuming a registered agent is all that's necessary, can I then open up a business bank account in the state of incorporation and transact all business in that state? Will selling services and goods to clients in other states necessitate that I qualify to operate in the clients' respective
states? Or will they operate in my state? Will the fact that all
transactions take place in the state of incorporation allow it to also be the state of operation, taking precedent over the fact that I'm working on a computer in another state (or country)?

3) Does the location of any equipment I use to operate the business, such as the location of my host's web servers or the computer that I'm using to answer email, program, etc. constrain the state of operation? In other words, if I have assets that participate in the business, must my business qualify to operate in any state in with the assets are located?

What I'm hoping I can do is file the LLC in a state like Delaware or Nevada (any suggestions on currently the most friendly state to Internet Businesses?), open a bank account over the internet with a bank in that state and have a registered agent set up for any physical mailings or notifications. I would then be free to live in any state of my choosing (or internationally), while for tax purposes the business operates out of the state of incorporation, regardless of where I'm doing the work from or where the assets (such as web servers) are located. And I would only file state taxes in the state of incorporation/operation.

Thanks for your help!


foxdmatt 21st April 2006 11:40 PM

your questions need to be answered by an attorney. I can answer some but your much better off asking an attorney and CPA and pay their fees. This will protect you later on.

SeattleCPA 25th February 2009 05:00 PM

I am a CPA. And I would say that you want to form your entity in the location where you'll ultimately operate. Ie., the place you'll live.

I think what people considering other states (or countries) maybe sometimes miss is fact that if you have a big enough profile in a state (like you, the owner work there... or the business owns property there... or you have people employed in the state), that state gets to tax you.

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