I am in the process of creating a web business with six other people. Right now, our focus is on design and hosting only for our design clients.

(Please excuse my interchangeable use of "registration" and "license" if they're not fully synonymous; if I don't get the details right it's one of those "you know what I mean" situations.)

Three of us live in Pennsylvania and three live in New Jersey. The seventh as far as I know is legally a New Jersey resident but is spending a lot of time in Buffalo (I'm not fully clear on his situation).

Discussions going back and forth seem to indicate that we would need to register (we decided on an LLC) both in Pennsylvania and in New Jersey, and beyond that that we would need a license in other states as well (e.g. if a customer from Maryland wanted a site from us, that we would need to register in Maryland).

This doesn't seem right to me. We have no brick and mortar, so each of us will be operating out of our homes. It seems to me that if a customer from Idaho wanted a site done, the work is being done here and not there.

Could we register in one state (we're currently leaning Pennsylvania), or do we have to register in each state where one of us lives (either a regular or foreign license)? And do we have to do anything in any other state where a client might come from because the work isn't going to be done there?

Thanks.

IANAL,

But we are a Sub-C registered in TN. We have clients across the US but do not register or purchase a business license from any other state. I would suggest you pick one state, register your corp. (Nevada and Delaware are both popular choices) and go from there.

=C=

1 business license from 1 state will do the trick.

Seven people setting up a business sounds like a bad idea,who gets the final say? with that many "managers" you wont get much work done.

Originally posted by jimpoz
Could we register in one state (we're currently leaning Pennsylvania), or do we have to register in each state where one of us lives (either a regular or foreign license)? And do we have to do anything in any other state where a client might come from because the work isn't going to be done there? Sure, you can incorporate in just Pennsylvania. Since at least one of you lives there, you will easily establish your business nexus there (that's where you'll open your bank accounts; you'll need a "process" mailing address at which the State can reach you if you get served any legal papers, etc).

The people in other states are simply owners or employees. It doesn't matter where they live, except as it affects their personal tax situations. That's something worth looking into in each state, since it's possible that you'll be required to withhold state income tax for those states if you'll be paying them as employees (For example, I've been on the payroll for years of a consulting firm based in Minnesota; they withhold New York State and City taxes from my wages and Ohio taxes from those of my colleague who lives there and file them with those states).

That's the kind of thing that a lot of small companies will stay "under the radar" on, but to be perfectly safe it should be looked into. Ideally, speak to an accountant locally about your situation. Of course whether you do pay those people as employees or not depends on your setup, what sort of entity your formally create, and what will work best for each of you. Again, an accountant can help you make the right decisions with full information about your company and each of your income/tax situations.