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  1. #1
    Join Date
    Jun 2009
    Location
    Los Angeles
    Posts
    6

    In which state to get a LLC/LLP

    We are looking into getting a LLC or a LLP, either in WA, CA, DE or NV. One of us lives in CA and one in WA. Our servers are in MI, IL and CA.

    We are looking at the options from a Legal/Tax standpoint, and would appreciate any input.

    Has anyone gotten one out of state before? and what can we expect?

    Keith
    Last edited by bangel; 07-01-2009 at 06:11 PM. Reason: included my name

  2. #2
    Join Date
    Jul 2008
    Location
    Eta Carinae
    Posts
    2,672
    CA is pretty expensive I believe with the licenses - and you should get a license where you are located, not where your servers are - i mean later on you could go for something national but for now You'd have to do something where you're residing because that's the taxes you have to pay.

    As for CA or WA, I can't advise which one is better or which one would be cheaper, you should consult a lawyer or accountant about that and see which one would be a smarter choice. I live in NY so I don't know too much about the business laws in the west coast.

    good luck

  3. #3
    Join Date
    Jun 2009
    Location
    Los Angeles
    Posts
    6
    njoker -

    Thanks for the quick reply. You are right, california is expensive to register the LLC. I think it's an ~$800 yearly "tax" to the state franchise tax board on top of the secretary of state fees.

    Our concern is, we want to have equal ownership of the business, so some kind of entity is needed, in one of the state's that we reside in.

    Does anyone know when a corporation needs to register in another state as a foreign corporation?

    Thanks
    Keith

  4. #4
    Consult an accountant. An accountant can help you with which state it is best to form the multi-member LLC in. After that, contact a lawyer, or go to some site that allows you to generate and download a partnership agreement. The partnership agreement is what is going to allow and contract all of you for equal ownership provisions, death rights, etc. The LLC formation is just for taxation purposes and licensing. You'll also want to register for an EIN at the federal level to pay your taxes at that level. Good luck to you.
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  5. #5
    Join Date
    Aug 2001
    Location
    Brea, CA
    Posts
    541
    CA is expensive on the LLC franchise tax, for sure, but they'll also probably require you to register in the state if you have a physical presence (office w/ any staff). We had a non-resident partner (a guy working from Colorado and later the UK) in our company history and they had to deal with California looking for its cut of their income. It was also a bit of extra paperwork. I'd definitely get professional advice to be sure.

    Needless to say, I'm glad our partners these days are all California residents.
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  6. #6
    Join Date
    Apr 2007
    Posts
    577
    Quote Originally Posted by bangel View Post
    njoker -

    Thanks for the quick reply. You are right, california is expensive to register the LLC. I think it's an ~$800 yearly "tax" to the state franchise tax board on top of the secretary of state fees.

    Our concern is, we want to have equal ownership of the business, so some kind of entity is needed, in one of the state's that we reside in.

    Does anyone know when a corporation needs to register in another state as a foreign corporation?

    Thanks
    Keith
    Keith, seeing how we are registered in CA, I can safely say that you're assumption of a $800 corporation tax is indeed true.

    Being a resident in CA, I registered the LLC here. It's pretty expensive compared to other states. I think the lowest is around $170 a year? I forget which state though.

    Advice: might want to do your research. Im pretty confident that your WA option is cheaper than CA.

  7. #7
    Join Date
    Jan 2008
    Location
    Sacramento, CA
    Posts
    3,657
    For most LLCs, you will need to also register in the home state of the business. So unless there is a DISTINCT advantage to registering in a state other than the home state, you should register in the home state to avoid paying the LLC fee twice. For example, even if you register your company outside of CA, if you have a presence in CA, you will have to pay the fees in the registered state AS WELL AS all of CA fees.

    But again, consulting an accountant is always the best option in these matters.
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  8. #8
    Join Date
    Dec 2003
    Location
    Calgary, Canada
    Posts
    42
    The previous poster is mostly right, your going to need to register twice in many situations when you have an "out-of-state" entity. I can tell you Washington is more attractive from a corporate tax situation. The LLC/LLP structure is a little different, but you need to talk to someone that understands this in order to make a decision factoring in all aspects.

    There are advantages and disadvantages of both jurisdictions and other jurisdictions.

    You need to consult an accountant or a lawyer regarding this though. Setting up a partnership between two people, regardless of the legal structure, is complex and you need someone that can draft an agreement between the partners. Spending a few bucks now will save you alot in the long run. Disputes and disagreements destroy businesses and generally only benefit the lawyers financially.

    Consult someone that knows what they are doing though. An LLC/LLP means nothing if the proper documentation and agreements aren't behind it.
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