How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask DanielleCPA Your Own Question

DanielleCPA
DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 713
Experience:  Years of Experience in Business & Personal Taxes
50747609
Type Your Tax Question Here...
DanielleCPA is online now
A new question is answered every 9 seconds

I am starting an LLC and would like to pay as little tax as

Resolved Question:

I am starting an LLC and would like to pay as little tax as legally permitted. I have heard that you can base your LLC in certain states that have lower taxes than where you will be conducting most of your business. I am in California, and most of my business will be conducted here, but I plan to expand into internet sales within 3 years, so hopefully I would sell nationally or even internationally. I assume that the first year or 3 I will be in the red, so this is a real concern for me at this time.
Submitted: 11 months ago.
Category: Tax
Expert:  DanielleCPA replied 11 months ago.

Welcome and thanks for your question

If you live in California and will primarily be conducting your business there, I recommend that you set-up your LLC in California. California does have a high minimum LLC tax compared to other states, but I still recommend that you setup there.

The idea that you can set-up in your LLC in another state with lower taxes and avoid paying tax in the state where you will be conducting most of your business is, unfortunately, a common misconception. Even if you set up your LLC in another state, you would still need to register it in California because you have a sufficient connection to that state. In multistate taxation, this concept is known as nexus. In your case, the connection is that your primary place of business is located there.

I understand that you plan to expand into other states in the future. Keep in mind that if you establish nexus with other states in the future, then you may need to register with those states. In most states, Internet sales is not currently enough of a connection to create nexus, but this is currently a hot issue within the world of multistate taxation, so that may change in the future.

Please let me know if you have any follow-up questions or need any clarification and I will gladly assist you. Have a wonderful evening!

DanielleCPA, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 713
Experience: Years of Experience in Business & Personal Taxes
DanielleCPA and other Tax Specialists are ready to help you
Customer: replied 11 months ago.

Can you tell me how California's taxes compare between an LLC and a sole proprietorship? Are the tax benefits different at different levels of income? Are the liability limits more advantageous for one or the other?

Expert:  DanielleCPA replied 11 months ago.
I would not recommend a sole proprietorship for liability protection purposes. In a sole proprietorship, a creditor could levy your personal assets to satisfy a business debt. A LLC will greatly limit the ability of your personal assets to be used to satisfy a business debt.

Because single member LLCs are disregarded entities for federal tax purposes (meaning that they do not have to file a separate business tax return), the tax benefits for a sole proprietorship versus an LLC are identical. Both are reported using Schedule C of your 1040 individual income tax return.

The difference is that California still requires a separate LLC tax return, which has a minimum $800 fee. California taxes its LLCs at their corporate tax rate, which is 8.84%.

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.