LLC OR S Corp in Delaware or Nevada?

Question

I am in the process of starting up an LLC for a web-based business. I need to know what state I should form it in. I am a US citizen currently living in NY, and I hope to be able to operate the LLC in either Delaware or Nevada. But my LLC will only have 1 member which will be me. Now I read that a single member LLC is ignored. Here is the statement, "Generally, when an, LLC has only one member, the fact that it is an LLC is ignored or “disregarded” for the purpose of filing a federal tax return. Treasury Regulations Section 301.7701-1,-2,-3" "If you prefer to file as a corporation instead of as a “disregarded entity” Form 8832 must be submitted." http://www.irs.gov/pub/irs-pdf/p3402.pdf

Is this true, and if so would it be best for me to start an S corporation instead.

Also i'm not to clear about Registered agent. Could someone help me shed some light on this, also could someone recommend a good Registered agent. Thanks!

Answer 1

For tax purposes only, a disregarded entity means that your LLC will not be classified as taxable on its own. By default it would be filed as a schedule C on your personal tax return unless you file form 8832 to elect to be taxed as a C corporation. If you make this election your business on Form 1120. This does not have any effect on your legal standing as far as other laws go that regard LLC.

A lot of people make a mistake in thinking they want to be taxed as a corporation. You will be considered an employee of the corporation and must pay yourself a salary, and pay all the employment taxes (even unemployment insurance), keep a workers comp policy on yourself and send yourself a W-2 at the end of the year. Plus depending on what kind of business you are getting into you could be considered a "personal holding company" or a "personal service company". Either way it means more taxes. Think carefully before doing that.

A registered agent is the person that registers your company to operate in a particular area. There are certain rules about who can be the registered agent that defers from place to place.

I would suggest consulting an attorney that specializes in starting business about what king of company you should be and where it should be registered.

Answer 2

That's correct, the LLC is ignored for tax purposes on a single member LLC. And as far as taxes are concerned, the S-Corp provides no tax benefit, any more than the LLC does.

The benefit of an LLC or S-Corp is to limit your personal liability for the activities undertaken by the business. As a sole proprietor you can be held personally liable for the actions of the business; everything you own could be taken in event of a successful suit against the business. With an LLC or S-Corp, your only risk is what you have invested in the business. Your personal assets would be protected from any claims against the business.

Both an LLC and S-Corp will incur additional costs to set them up. The S-Corp will also be required to file a separate tax return and possibly other reports and statements with the state where it is incorporated. Unless your web-based business is going to expose you to significant personal liability both of them are a needless expense. Running your business as a Sole Proprietorship would probably make more sense and would cost you less in the long run.

Answer 3

Without knowing your income, it's hard to answer this question. Creating an LLC is peanuts - not even worth going to another state (S-corp too most likely). Why don't you declare a relative in another area as your "agent" that way you can take tax deductible trips to see them for your "board meetings"