What state to form LLC in for amazon online biz?

[Productions]

Since I'm going to need an EIN (as I don't want to give Amazon my SSN), and need to get a new bank account, and new name to open up my stealth account. I'm on the process to set up an LLC. I live in California. Should I just open up the LLC where I live or find some agent to open up in another state like Nevada/Delaware/Wyoming? And if I do, do I need to do more paperwork to get a business license for this LLC in California as well? Still researching this so quite not sure what to do, if anyone can point me in the right direction to make sure I don't set myself up at a disadvantage or go through any unnecessary extra hassles for setting up in the wrong place. Your help is much appreciated, thanks!

[yankee]

You need to consult with your advisers such as accountant. You are definitely on the right track in my opinion especially being in CA. I personally like WY for a variety of reasons.

One question is, what state is your inventory?

[Productions]

I'll either have some on Amazon FBA or hold it near me in California.
I prefer having the supplier ship it direct to Amazon though using FBA, but maybe just in case amazon suspends my account I may store the bulk of it here in California and just ship out myself until I feel more secure that my account is in good standing.

So you suggest doing the LLC outside of CA, and in WY over the other states? What website service do you recommend to go through for this?

Thanks

[glacier922]

I have been hearing that Wyoming is the cheapest and if you're not going to have employees, you can register with that state. If you're hiring workers though, well that's another story

[Productions]

Yeah no employees. I'll look into Wyoming thanks.

But I was researching online, and some say I still would have to pay and file paperwork in my state too even though I'd be operating from home (laptop/computer). Anyone have insights on that in regards to California?

[yankee]

Originally Posted by Productions

Yeah no employees. I'll look into Wyoming thanks.

But I was researching online, and some say I still would have to pay and file paperwork in my state too even though I'd be operating from home (laptop/computer). Anyone have insights on that in regards to California?

depends on your structure, how you get paid, etc... you need an adviser for sure. I make sure I have zero salary and only get taxed at Capitol gains, but I am not an employee and I am not a sole owner for this reason alone.

[Productions]

Thanks for the tips!

When would we need to use a service like LegalZoom to register for us to become an LLC? I mean it looks like you can just download the form and pay registration fee on my home state's website - is there any benefit to using them that I'm not quite seeing. But if I'm registering the LLC in another state right, that's when I would need a service like legal zoom to be my agent, right? Or would I be able to do this myself as well?

[Productions]

I was thinking LLC is the best way to go for me, but then I read this post on reddit:

[–]simplyroh 1 point 1 year ago

I set my LLC as an S corp for tax purposes... it can be both.

[–]ZadocPaet 2 points 1 year ago

I am aware that there are circumstances where an LLC can file as an s-corp with form 8832, but they are not automatically given that status. It makes virtually no sense to be an LLC because it lacks the corporate litigation shield. It also lacks the massive tax incentives that corporations have over an LLC. And "S corp" is just an IRS filing status. It's not the legal organization. There are virtually no benefits to being an LLC other than it's marginally less expensive to organize. In fact, no business which has revenue should ever be anything but a corporation.

[–]dutchmanx86 2 points 1 year ago

This is the first time I've read this viewpoint.

What are the tax benefits of a corporation over an LLC? My understanding is that an LLC is basically a flow-through entity, while a corporation's income gets taxed twice - once upon earning the money, and again upon distribution.

Additionally, I was under the impression that LLC's provide protection from liability of a company to the same degree as a corporation, but without all of the formalities and overhead of maintaining one.

I'm curious to hear your opinion.

[–]ZadocPaet 1 point 1 year ago

Aha, that's where the trick comes in. Simply don't pay yourself. Keep the money in the corporation and expend it on your bills as a corporate expense. At the end of the year it's all a write off. If you have a day job you can give money to the corp and write it off that way too.

With an LLC, since it flows through to you, you can be liable, personally. With a corporation only the corporate assets can be held liable.

It's very little overhead. Just some extra paperwork. Well worth it for the tax benefits.

[–]dutchmanx86 1 point 1 year ago

Hmm, makes some sense in theory, though wouldn't that make it easy for a lawyer to "pierce the corporate veil", as you are mingling personal and corporate expenses?

[–]ZadocPaet 1 point 1 year ago

Nope. Because the assets are in the corporation's name. I run my business out of my house. My home office is, let's say, 1/5th of my place. Therefore 1/5th of the rent or mortgage is a write off. My internet is required for my business. Complete write off. You're allowed to give money to your company. I can give the rent, cell phone, and internet bill to my corporation and pay the bill.

[–]dutchmanx86 1 point 1 year ago

Thanks for your response. How does the salary component work? I'm assuming anything not paid out is a 35% corporate tax?


[–]ZadocPaet 1 point 1 year ago

Make sure you have zero profit. No profit no tax.

[–]dutchmanx86 1 point 1 year ago

Is it legal to pay yourself a variable salary that always results in 0 profit?

[–]ZadocPaet 1 point 1 year ago

You're technically not paying yourself salary. You're paying your expenses. Salary is taxed.

Your thoughts?

Also, I talked to a LegalZoom lawyer and she said that it wouldn't make sense to form an LLC outside of where I'm from in California because it would end up being more expensive than if I just formed it in state.

Also is forming an LLC easy to do on my own? I see where I can get the form on the Secretary of State's of website, and it's just a few questions and pay the fee. However, I was told by the lawyer that I need to also prep an "Operations agreement" etc which is usually something like 20 pages. Did you guys do this on your own / is there a template available somewhere?

Also lastly, how much is a DBA cost and is it easy to do myself? I'm thinking I may just start with a DBA and build my trademark and brand and get the product selling on Amazon before I form an LLC or corporaton. Then register the trademark/brand under the new company eventually. How does that sound?

And when do I need to use a service like LegalZoom to help with forming the company? Is this pretty basic stuff that I can do all on my own?

Thanks

[yankee]

You need your accountant. It really has NOTHING to do with filing costs. It is all about reducing your liabilities.

ProVision is a national accounting firm if you can not find anyone local(Can not imagine, but who knows)

Legalzoom is not suggested by me. All they do is charge you a fee for filling out the form...

[vogeltron]

If you create a LLC as a fellow Californian. I know the state is very big. But Nevada is most likely the best option because you need to have some sort of Physical presence there even in the form of a mail box.

[jeffweico]

There is a lot of misinformation in the huge quote posted by Productions.

If you have a corporation or an LLC organized outside of your home state, you will have to have a registered agent in that state to accept any service of process and any communications from the Secretary of State regarding your business. Some states also require a physical presence in the state. But both can be had by companies that specialize in maintaining these for you. Some cost $150 per year, others cost over $1000 per year, so it pays to shop around.

Legalzoom is for people who don't want to hire an attorney but don't feel comfortable filling out the forms themselves. They have very little value in my opinion. But if it makes you sleep better at night, then go for it.

DBA's are NOT good for stealth. The reason? When you set up a DBA, then YOU are the legal entity. So, the IRS will be verifying that YOUR REAL NAME matches the EIN. Your business name has nothing to do with it. Corporations, partnerships and multi-member LLC's are all distinct legal entities, so the IRS verifies the BUSINESS NAME and the EIN. That is what you want for stealth.

Also, DBA's are really easy to set up, but are usually not the best option when it comes to taxes.

The reason it pays to speak with an attorney or a tax accountant is that there are many ways to organize a business and doing it the RIGHT WAY can save you hundreds, or even thousands of dollars on your taxes. Which one is best for you will depend on your circumstances, there is no one best option. This is an area where being cheap could end up costing you a fortune.

Done correctly, it will work very well for stealth and it does not have to cost you a fortune.