Formation of LLC for online software business

[clickfwd]

Hi,

I run a profitable online software business and I am not a US citizen and don't live in the US. I use Paypal for payments and I am the only employee of this business, although I do outsource part of the support work to users in other countries.

I am considering the formation of an LLC in the US for this business. My questions:

1) Does it make a difference which state I use to create the LLC? I understand some states have lower taxes like Delaware, is that really the case and are there any resoureces that compare the taxes by state? Anything else I should consider for choosing a state?

2) How difficult is it to open a bank account and Paypal account once the business is established? For the bank account do I need to be physically present?

3) I sell to people all over the world. Would I have to collect any sales tax depending on where the user is buying from?

4) Would I have to pay taxes on sales to non-US clients?

Is there anything else I should consider?

Thanks!

 

[jharris352]

1) Does it make a difference which state I use to create the LLC? I understand some states have lower taxes like Delaware, is that really the case and are there any resoureces that compare the taxes by state? Anything else I should consider for choosing a state?

Yes there are tax consequences depending on the State you incorporate in. Delaware and Nevada are the two best states. Both have made a cottage industry out of attracting corporations. Nevada has very strong laws concerning secrecy of ownership. There are companies that will provide you with a presence in Nevada and even a "director" who will pose as your figurehead. Search Nevada Corporations.I am not recommending this or any company, just providing you with information.

2) How difficult is it to open a bank account and Paypal account once the business is established? For the bank account do I need to be physically present?

It should not be difficult to open a bank account at all if you use one of these corporate services. You will have to get an Employer Identification Number (EIN)to conduct business or open a bank account. Again the services will help you do this if you don't want to do it on your own.

3) I sell to people all over the world. Would I have to collect any sales tax depending on where the user is buying from?

I would consult a CPA about sales tax but generally on the internet there is no sales tax except for possibly in the state of your incorporation. Again, check with a CPA (Certified Public Accountant).

4) Would I have to pay taxes on sales to non-US clients?

You pay Income tax in the state where you are incorporated. As we said earlier there is no corporate income tax in Nevada. There will be federal income tax and depending on the way you form your company there could be individual taxes owed. Your taxes do not depend upon where your customers are. There may also be individual taxes in your home country. Obviously I don't know about that.

Is there anything else I should consider?

Depending on the size of this venture I would contact an attorney in the State that you are incorporating in to advise you on tax and liability matters.

Good luck in your venture. I hope this helps.

 

[clickfwd]

Thank you for your answer. It does help!

 

[clickfwd]

I have a follow up question.

I've been reading that the most important issue affecting etailers is the definition of what constitutes nexus for physcal presence in a given state. Let's say I rent server space in Florida to host my website. If I form a company in Delaware or Nevada and I only sell licenses to use a software which is downloaded from my site, would I have to pay any sort of Florida taxes?

I am just looking for some guidance so that when I finally hire a lawyer I can ask the right questions and know whether they know what they are talking about.

 

[jharris352]

Your income tax is paid where the company is formed.