Legal Question in Business Law in California

OK. First, being a California resident or not is not an issue. You'd be surprised how many California residents form LLCs or corporations in other states, including Nevada, thinking they will save taxes (nope) or gain other advantages (probably not). You can form an LLC in any state, your own residency is not an issue. The choice of domicile for the LLC should be based upon, among other things, where it will do business -- and that's usually where the owner lives. On the other hand, if you expect the LLC to outlive your college days, forming it as a California LLC may make longer-term sense.

California does indeed charge a minimum annual tax of $800 on LLCs and corporations that (a) are formed in California, or (b) must register as foreign LLCs to do business here. California also charges a tax on LLC's revenues, much like a sales tax, which may sometimes be a good reason to form a corporation rather than an LLC. On the other hand, LLCs can deduct losses in excess of the owner's at-risk investment, which for some businesses (such as those with high early-years losses due to research and development expense or construction costs, etc.) offsets the tax on revenues.

In sum, I wouldn't let where you live temporarily be a major influence on either whether you form an LLC or corporation, or whether it is domiciled in California or elsewhere. The issue is where it will be "doing business" - i.e., keeping its books, making its product, performing its activities, or possibly, where is the hand that guides the mouse that constitutes the business.

You really need good current information, and I suggest you buy (or borrow) two or three of the self-help business books with names like "How to Form Your Own California Corporation" from companles like Nolo Press and others, and study them fror ideas and tips.

If you would like, we could send you a FREE memorandum on the advantages and disadvantages of various California legal entities such as corporations and LLCs. In addition, if you would like, we could offer you a free 30 phone or email consultation on these matters.

By Grace...

Shawn Jackson ESQ. (707) 584-4529

Business Development Attorney EMAIL: [email protected]

www.CaliforniaBusinessDevelopmentAttorneys.com

www.CaliforniaBusinessDevelopmentCenter.com

www.CaliforniaBusinessDevelopmentPlans.com

www.CaliforniaBusinessDevelopmentIncubator.com

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