Starting an Internet company

You will pay the full taxes of your home state. You want to avoid paying taxes to other states, so the entity should live in the same state you do.

You might get some protection from a Subchapter S corporation. You won't get very much.

You do business where you publish the newsletter. (If you host it on a web site, you might be doing business where the site is physically located, if it's physically located.)

You can't limit your liability for your own individual actions (e.g. defamation).

Except for a C corp, you are taxed when the entity earns the money, not when you take it.

No.

Seth

wrote to have limited liability and save on taxes; and I'd

There are multiple implications to entity selection. May I suggest you developing a relationship with a local CPA or EA who can guide you through the process.

Your best bet is to form the corporation in the state in which you reside and in which you plan to operate the business - meaning where is it you will sit your self down and do the work of the business?

Also remember that you can not insulate yourself from your own actions.

- Some say that an LLC will not limit my liability,

That's right. Or other partners/owners of the entity.

It doesn't. You'll have to pay taxes, register the company/business, and be subject to the laws of the state in which you operate the business.

You'll be taxed by the federal and state, and in some cases the county/city, based on business profits. This is not impacted (for the most part) by how much you "take out" of the business.

And you're planning to give investment advice??????

No. Hell no. It's not legal. It's called fraud.

Find a local CPA or EA to give you lots and lots of advice, you seem to need it. Be prepared to pay for that advice, at least up front.

No. I'd say the place where you do business is where you were working when you wrote the newsletter, advice, etc. Where the site is physically located is irrelevant. By physically located I mean where the datacenter of the site is. That depends on which web hosting company you choose. Besides, the web hosting company may change the location of the web server from one city to another, or perhaps they use load balancing and host your website on many servers throughout the country.

Where does one draw the line between an action taken by the individual and an action taken by the company? I suppose the case of defamation is clear-cut, but what about others?

That's the case where it _isn't_ "physically located".

I own a server that's currently in Virginia (I'm in Minnesota). If I were to engage in such a business using that server, would Virginia claim I was doing business there?

Physical actions are taken by the individual (and the company may also have liability if he does it as part of his employment; this matters when the company has more assets). Some logical actions (e.g. signing a contract that says "Company X, signed by Person Y, President") are taken by the company.

Seth

Put the cart before the horse. Walk before you run. If you are a one- person operation, then there is no simpler and more effective way to do business than as a sole proprietor. Just file schedule C with your taxes and you are done. Why do you want to spend thousands of dollars plus lots of non value added time forming some more complex entity for a business that is a one-man show? As others have said, no legal mumbo jumbo will insulate you from the responsibilities to your clients. I suggest reading some of my business tips here to get you started:

Thanks. That's succinct and to the point.

What if I move after I start the company? To minimize taxes, would I then have to re-register the company in my new home state? To take this a bit further, what if I am always moving? The concept of a home state / location where business is done seems to me to be moot with an internet business.

Right. But since it's published over the internet, I could conceivably be anywhere. I could even be outside the country (and thus, not in any state). With an internet business, how does the law determine that I am in a particular state for tax purposes?

wrote

What you need to do is just operate your busines as a sole-proprietor. No issues about reforming in another state if you move.

Now, where you physically do your business is where you'll owe tax to. So if today you're in Topeka, you owe tax to Kansas. If tomorrow you're in De Moines, you owe tax to Iowa. If the next day you are in Sun City, well, you'd not owe tax to Florida because they don't have a state income tax. Generally your home state taxes your global income, allowing a credit for tax paid to another state. Corporate structures generally allocate their net earnings to each state, the most common method is a factor comprised of revenues, wages and equipment that is attached to each state.

Unless you want a tax preparation bill larger than your net profits, I suggest not moving around every few days in some effort to skirt the state income tax laws.

But regardless of where you are when you physically conduct business, it's all taxaxble for federal purposes.

FTI: What state do you intend to carry your drivers license in? What state will you be registered to vote? What is the most common address you will use for medical, banking and other legal documents? That state will most likely consider you to be a resident and your income subject to beign taxed. So, right or wrong, if you're a resident of Illinois and you actually conduct work in various states, Illinois taxes all your income, giving you a tax credit based on the taxes you pay to the other states on that income. Meaning you have to actually file in those other state (yes, they ask for copies of those returns).

See above. Unless you physically and permanently move out of the country, you have a home state to which you will owe taxes. Today it's where you got up this morning. If you pack up all that and move three states away, it'll be the other state tomorrow. There is well established law about what constitutes a tax home.

So, unless you are just asking to be curious, seek the professional advice of a tax attorney about your plans to be nomadic in your business operations.