Legal Question in Tax Law in California

Taxation of dotcom in Nevadad or California

Hi All, just wondering how the taxation for an LLC would work. I am a California resident and my objective is to pay as little taxes as possible (legally) with a new dotcom business. It will only be virtual, so I am thinking about starting a Nevada LLC instead of a California LLC as Nevada does NOT have state taxes. From what I understand CA and NV LLCs both require you to pay federal income tax on whatever profits/losses acquired by the LLC on your personal federal income tax return (unless you choose to be taxed as a corporation at the higher corporate tax rate). So, I was thinking because I am virtual, I can start up the dotcom, form LLC in NV and will NOT have to file as doing business in any other state.

Although, my server(s) will be located in various places throughout the country, but that doesn't have an affect on my taxation requirements right?


Asked on 9/05/07, 4:41 pm

1 Answer from Attorneys
Jeb Burton The Burton Law Firm

Re: Taxation of dotcom in Nevadad or California

Since your principle place of business is California (that is where you work, and it sounds like where any staff will work), you most likely will not avoid California Taxes by registering in Nevada.

It is also important to note that LLCs are usually what we call a "check the box" organization, meaning income passes through to you personally not taxed at the entity level. While there is potential tax consequences in California if your LLC brings in a significant income, my guess is that you will not be subject to these (at least not for a while). Further, these can not usually be avoided just because you register your LLC in another state.

Of course, these are general answers and you should contact directly a Tax Attorney or CPA for answers to your specific situation.

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Answered on 9/05/07, 5:32 pm


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