Legal Question in Tax Law in California

in or out-of-state LLC?

Hello,

I live in California but I plan to form and out-of-state LLC (Nevada). I have a fulltime job but I am an online e-mini future option trader on part-time. My trading account is quite large. And this year alone I'm projecting about $50-60k in capital gain. I don't take money out for my personal use. I have been letting it grows. Currently I don't have much expenses to writeoff either. And the main purpose of forming an LCC for my trading account is for assest protection, and may be making a few business loans to increase my investment capital down the road. I know state of CA has this minimum tax $800 for LLC.

Now my question is... as an out-of-state entity, when I don't actually 'do' any business other than trading virtually online 100% of the time, do I really need to pay CA state tax?

If I have to pay this tax anyway, what's the advantages of forming an out-of-state entity, if any? You suggestion is greatly appreciated.

Regards,

Mike


Asked on 5/10/06, 3:59 pm

1 Answer from Attorneys
Carl Starrett Law Offices of Carl H. Starrett II

Re: in or out-of-state LLC?

If you reside in California and all of your efforts to generate income are in California, then you pay 100% of California's taxes. There is nothing in your situation that would seem to justify the hassle of setting up a sister-state LLC and then qualifying it to do business in California. You are better off with a California corporation or LLC.

I would seriously consider talking to your CPA about whether an LLC is really right for you. A small corporation is just as easy to form and run as an LLC and sometimes has tax advantages over an LLC. After you talk to your CPA. contact my office for a complimentary consulation. I charge the the same basic fee to form either a corporation or an LLC.

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Answered on 5/10/06, 4:09 pm


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