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Remember that California minumum tax for an LLC is $800. EVERY YEAR. that is what you have to pay even if you lose money or do nothing. don’t form an llc in 10
by omarforgotpwd 9y ago
Remember that California minumum tax for an LLC is $800. EVERY YEAR. that is what you have to pay even if you lose money or do nothing. don’t form an llc in 10 minutes and then screw yourself over with thousands of dollars of debt just because it makes you feel cool.
A hardware engineer just came into my office earlier with a prototype for a cheap server with a good GPU for AI tasks. He incoporated in California in 2013 and still hasn't actually gotten a product out or made sales. Meanwhile he paid 6 years of taxes * $800 = $4800. He could have bought an iMac Pro, or invested in the business in some way if he had not incorporated. You don't need to officially be an LLC or corporation for your project to be real.
If you really do need to legally form a company to separate out finances and liability, depending on what you’re doing, you might want to look at starting a Delaware C corporation (they have a minimum franchise tax of $350 plus I think a $50 filing fee). If you’re thinking of taking investment the rules and laws of Delaware are very well understood and there is a substantial amount of case law that makes it a lot more predictable to use their courts as almost everything that can happen has happened. So for certain types of companies it’s cheaper and better. For smaller things a C corporation may be overkill and an LLC or S Corporarion may work better if you do not need to raise money.
- BinaryIdiot 9y agoYou do realize if you do business in CA you have to pay CA taxes, right? You're mentioning Delaware but that would be for corporations and dispute management. You're not going to get away from taxes...
- briandear 9y agoWe ARE talking about corporations.
- vonmoltke 9y agoNo, we are talking about LLCs. LLCs are not corporations.
- vageli 9y agoThey are a form of corporation. It even says so in the name.
- vonmoltke 9y agoLimited liability companies and corporations are distinct legal structures: https://www.thebalance.com/what-is-the-difference-between-an-llc-and-a-corporation-397526 https://www.thebalance.com/what-is-the-difference-between-an... https://www.dos.ny.gov/corps/llcguide.html https://www.dos.ny.gov/corps/llcguide.html LLCs are not incorporated.
- maxlybbert 9y agoThe “C” stands for company: http://www.professorbainbridge.com/professorbainbridgecom/2016/07/an-llc-is-not-a-corporation-but-sometimes-youll-get-corporate-law-by-analogy-anyway.html http://www.professorbainbridge.com/professorbainbridgecom/20... .
- mark212 9y agoRight but using the example there aren’t any profits to tax, so his friend would’ve saved several thousand dollars by having the entity registered in another state with a lower minimum. Florida, for example, is less than half of Delaware and SD is even lower. Much better choice for a one person early stage experiment.
- zhobbs 9y agoIf you live in CA you're required to file as a foreign corporate entity, and still pay the $800 in taxes. You can't open a bank account in a CA bank without proving that you've made that filing regardless of where the corp was registered.
- wolco 9y agoI could be wrong but one could open a bank account in a different state. In this case he formed a business but did not make a profit or sale or employ anyone for 6 years. It doesn't make sense to form an llc unless you require it. Start smaller.
- BinaryIdiot 9y agoIf you live in CA and are operating your business in CA, you're probably going to have a hard time arguing you don't have to pay CA tax.
- chaosite 9y agoRight, but the point is that he isn't operating a business at all, seeing as there's no product nor sales. So what does he have? Maybe he doesn't need an LLC at all right now.
- mark212 9y agoThat is not true. I speak from personal experience of less than a year ago, with a gigantic international bank.
- firebones 9y agoDare I say that after hammering away for 6 years with no profitability, it's not the $2.19/day in LLC tax that's bleeding him dry, it's the fact that the market is sending him a message about his offering.
- omarforgotpwd 9y agoTrue, but there was no offering yet. This is not uncommon among aspiring entrepreneurs I think, and they are mostly finding things out of their own pocket.
- jcoffland 9y agoNot to mention that if you fall to pay the LLC tax on time you can be hit with literally thousands in fines.
- dragonwriter 9y agoIf you register a foreign (outside of California) corporation or LLC (and probably LLP, for the same reason, but I don't recall.actuslly seeing that) but do any intrastate business in California, you will legally be required to register with California as a foreign entity and still pay the California tax applicable to your particular form of limited liability entity. So, “jist set up an entity wherever the setup costs are cheapest” may actually just layer that jurisdiction's tax on top of CA tax, depending on your business details.