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A few big gotchas with LLC though. Every year you have to pay a flat $800 to the state of California. Sucks if your business is not making that much, $800 can

A few big gotchas with LLC though. Every year you have to pay a flat $800 to the state of California. Sucks if your business is not making that much, $800 can be a significant cost. Self employment tax hurts bad. Basically this is Medicare and social security. Can be a huge amount owed seperate and in addition to income taxes.

dublinben 11y ago
Why would you incorporate your LLC in California? You can get an LLC in other states for under $100/year.
- nodesocket 11y ago
  Quite honestly ignorance and just did what Legalzoom recommended. Also, if you have to go to court, it is much easier to do so in the state that you live.
- gamblor956 11y ago
  And if you are physically present in California, you still have to pay California taxes for the LLC's income, so you accomplish nothing except exposing yourself to liability in another jurisdiction.
  - dublinben 11y ago
    There's a reason why most companies incorporate in states like Delaware, and additional liability isn't it.
abalashov 11y ago
Self employment tax hurts bad. Basically this is Medicare and social security. Can be a huge amount owed seperate and in addition to income taxes. Does it ever! I owe over $100K in back taxes, and the majority of it is SE tax. Income tax accounts for a relatively modest portion. Self-employment tax is assessed against gross personal income (aka net business income off Sch C, in my case) prior to any personal Sch A deductions. In my case, the latter proved to be quite significant, especially since I was paying a lot of interest on a mortgage for much of the period in question. So, I had years where my taxable income for SE tax purposes was (just making up numbers here), say, $50K, while my net income for federal income tax purposes was something like $19K.
- nodesocket 11y ago
  Sorry, I feel your pain for sure. Curious to hear more about your VoIP startup. Want to shoot me an e-mail (in my profile)?
  - abalashov 11y ago
    Shot you one. FWIW, I recently wrote a blog post about how I ended up in this strange place, professionally: https://likewise.am/2016/03/30/ten-years-of-voip-sip/ https://likewise.am/2016/03/30/ten-years-of-voip-sip/

dublinben 11y ago

Why would you incorporate your LLC in California? You can get an LLC in other states for under $100/year.

nodesocket 11y ago
Quite honestly ignorance and just did what Legalzoom recommended. Also, if you have to go to court, it is much easier to do so in the state that you live.
gamblor956 11y ago
And if you are physically present in California, you still have to pay California taxes for the LLC's income, so you accomplish nothing except exposing yourself to liability in another jurisdiction.
- dublinben 11y ago
  There's a reason why most companies incorporate in states like Delaware, and additional liability isn't it.

abalashov 11y ago

Self employment tax hurts bad. Basically this is Medicare and social security. Can be a huge amount owed seperate and in addition to income taxes. Does it ever! I owe over $100K in back taxes, and the majority of it is SE tax. Income tax accounts for a relatively modest portion. Self-employment tax is assessed against gross personal income (aka net business income off Sch C, in my case) prior to any personal Sch A deductions. In my case, the latter proved to be quite significant, especially since I was paying a lot of interest on a mortgage for much of the period in question. So, I had years where my taxable income for SE tax purposes was (just making up numbers here), say, $50K, while my net income for federal income tax purposes was something like $19K.

nodesocket 11y ago
Sorry, I feel your pain for sure. Curious to hear more about your VoIP startup. Want to shoot me an e-mail (in my profile)?
- abalashov 11y ago
  Shot you one. FWIW, I recently wrote a blog post about how I ended up in this strange place, professionally: https://likewise.am/2016/03/30/ten-years-of-voip-sip/ https://likewise.am/2016/03/30/ten-years-of-voip-sip/