Legal Question in Business Law in California

For starters you cannot "incorporate as an LLC." You can incorporate, which is forming a corporation, or you can form an LLC, which is not incorporating. There is a lot of bad information out there about forming LLC's or corporations in various states. Nevada is touted because there is no corporate income tax. Of course if you form an LLC you wouldn't be taxed as a corporation anyway. Also, if you do business in California, you would have to register in California as a foreign LLC or corporation, as the case may be, and once you do that you are subject to California corporate or LLC taxes anyway on your California business activity. Deleware is great if you want to go public, because Deleware has corporate laws that are pretty much the most favorable to officers, directors and majority shareholders of any state. So as a Deleware corporation you can plan your IPO in such a way as to retain as much control as possible even after selling a lot of the company to shareholders. Of course if you don't plan to sell shares to investors, that is of no benefit. And of course it doesn't apply if you are an LLC not a corporation. California has a nasty gross receipts tax on LLC's. But you can totally avoid it by forming a corporation instead and electing subchapter "S" taxation. Of course "S-Corp." status is not without pitalls too.

Bottom line: Ignore the hype about what state to incorporate in, unless you are able to control which state your revenue is recieved in, AND you care about nuances of corporate control between shareholders and officers/directors. You need to sit down with an attorney and your business plan and make choices of LLC versus corp. versus S-Corp. based on the facts of your planned business operations. Just going with "NV" is best or "DE" is the way to go, will do nothing but set you up for various tax and legal issues that you will have to pay lawyers and accountants to fix.

Think long and hard before you incorporate in DE or NV. For 99% of people, it offers no advantages and will likely end up costing you way more in the long run. I know because I hear from hundreds of people who complain to me that their DE or NV corporation/LLC (formed by online incorporation services or other lawyers) cost them much more than simply doing so in their home state, with no advantage whatsoever. I wrote a short blog article called --The Delaware Myth-- that you can see here: http://incaroo.wordpress.com/2009/12/23/the-delaware-myth.