T Nation

E-Commerce Experience / Advice


#1

I’m looking for advice on creating an LLC for an e-commerce business.

My question is about where to form the LLC. The company will operate 100% online (we are planning to use Shopify) and will utilize a drop-shipper for the foreseeable future. We will not have any inventory or employees. We will; however, have a number of contractors. All of the business partners are located in different states (MD, CO, & TX) and there won’t be a physical location. I have read there are benefits to organizing in Nevada and Wyoming, but I’m unsure of the ramifications for the partners.

Any advice would be greatly appreciated.


#2

What does the ownership look like? Just you? You and your spouse/business partner? Or will a trust own it?

Depending on ownership an LLC that elects to file as an S-Corp can be the most tax efficient while still retaining the lawsuit protection of an LLC. It’s an annoying return to file though. You need to have formal meeting minutes to be an SCorp. Which is funny. It was my wife and I pretending to be a board. “I second that motion” with two people at the table.

Also note that the state you file the business in is the state that you have to collect sales tax on, which is why Wyoming and Rhode Island are more popular than Nevada. That gives you a competitive disadvantage in whatever state you incorporate in. We sold a quarter million a year and had exactly zero sales to Wyoming.

Edit:
I forgot to mention if you incorporate in Wyoming and your house is in NY you will have a hard time proving to an auditor that your business expenses for printers/internet in NY are legitimate. They may even disallow them. But there’s a way to do it right. Ask a real CPA lol.


#3

3 unrelated partners.

I will look into the S-Corp requirements, thanks. The wife is a tax accountant so I should have that angle covered.

I thought Nevada had no sales tax either?

What about the whole registered agent issue for a foreign organization? Do you know how it works?

As it relates to sales tax, it seems like a pretty gray area. We will all be working out of “home offices” for the foreseeable future. One in MD, TX, & CO. Some sources seem to indicate we’ll need to collect sales tax in these states as well, but other don’t. Was hoping @countingbeans might chime in on this aspect.


#4

I’m not overly concerned about being able to deduct our internet servics, but I’ve made a note of it, thanks.


#5

this is the sort of question that @Dr_Pangloss always knocks out the park