Argh - California Sucks - Out of State LLC Questions, help!

[JasonR]

Alright, so I don't have a ton of capital to start my business. A California LLC will cost me $850 a year. The other problem: to go the sole prop route and file for a business license, and home occupation permit I need homeowner signature (probably not going to happen) and some sort of utility bill in my name (also unlikely). I'm renting a room, and have no bills in my name that ties me to the actual property.

I'm a California resident, and am starting an e-commerce business. At first, I'm going to be dropshipping ONLY (to get up and running). So technically, I don't really have a business location.

So I was going to file an LLC in Nevada, and get rolling. Well, if I sell to California, and since I'm a California resident, California is likely to hit me with that $850 fee on TOP of the fees paid in Nevada. It'll cost about $400 in Nevada.

The shitty thing is I can't sell any product without all the required business docs (can't get accounts with distributors). So I'm kind of stuck. Has anyone dealt with this before?

One option is filing in Nevada and becoming a Nevada resident. My buddy has a place in Vegas which he probably wouldn't care if listed it as my home address, and gained residency there. This could be a viable option since I could establish residency at a later date. However, I would be living in California.

Also, coincidentally, my vehicle isn't in my name, so nothing really ties me here except for my job. I'm not trying to do anything shady here, I'm just trying to get off the ground and running as cheaply as possible. Thoughts?

 

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[wade1mil]

California can suck like that. I feel your pain

I'd contact GlobalWealth and discuss opening an out of state LLC. I think he will have most of the answers you need.

 

[ChickenHawk]

This is a good example of why some states are losing entrepreneurs, while other states are gaining them. A few years ago, I helped establish a brick-and-mortar business in Michigan and was shocked at how many legal/regulatory/fee hurdles we had to overcome just to open and run one small enterprise. If I had to do it all over again, I'd probably never set up shop in a state that isn't business-friendly. That might be something to consider since you're just starting out, but I'm sure you have other reasons for wanting to stay where you're at. It's always a balancing act, isn't it?

It looks like you're looking at this from numerous angles, so hopefully a good solution will present itself. I wish I had better advice to offer. Good luck to you!

 

[MJ DeMarco]

So I was going to file an LLC in Nevada, and get rolling.

This won't exempt you from the LLC filing requirement in CA.

Just to give you an example how much CA sucks a$$, I've paid them nearly $3K in taxes and filing fees for the last 3 years.

Why?

My LLC (AN ARIZONA LLC) has a partnership interest in a California company which has a physical location in the state. Regardless what my K1's say ($200K loss or 200K gain) I'm required to file with all fees associated. And yup, this is regardless if I NEVER set foot in the state. My LLC is registered in AZ.

Unfortunately, if you live in CA, entrepreneurs and businesses are in their cross-hairs -- the state government simply doesn't give a f*ck who they tax away to pay their politicians, unions, and underfunded pensions. At some point, there won't be any businesses or innovation left to tax.

 

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[socaldude]

I share the same frustration with California's voracious appetite for taxes and controlling people's lives. :nonod:

Worst part? Its gonna get worse. Governor Jerry Brown is leading a massive campaign this year for proposition 30 to raise taxes even more!

The funny part is the vast majority of californians pay ZERO taxes. As a matter of fact they get a nice big fat check during tax season. For doing what? Nothing. Good for you for being lazy and irresponsible but god forbid you start a business and create jobs and value, you should be punished for making people poor and being evil.

It's not gonna change anytime soon. I'm thinking about moving to Nevada as well or Arizona. California hates businesses and has no concept of maximization of utility. They pay university police officers 100k a year to give out parking tickets and catch speeders, fail.

 

[needchaser]

What about websites, ones where you're not selling a physical product? If you just wanna LLC your website can you do that out of state fairly easy?

This won't exempt you from the LLC filing requirement in CA.

Just to give you an example how much CA sucks a$$, I've paid them nearly $3K in taxes and filing fees for the last 3 years.

Now I know why some people wanna let this state fall into the F#$^in' ocean.

 

[socaldude]

What about websites, ones where you're not selling a physical product? If you just wanna LLC your website can you do that out of state fairly easy?

I'm pretty sure california will not give a shit. An LLC is an LLC. If you profit $500 in a year; congrats you are now in the red as you had to pay $850 to the Cali government.

 

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[needchaser]

I'm pretty sure california will not give a shit. An LLC is an LLC. If you profit $500 in a year; congrats you are now in the red as you had to pay $850 to the Cali government.

But can you LLC with an out of state address? I saw something on CNBC where this guy in Nevada was registering businesses for people using his address for a fee, seemed like tons of people around the country were using his service. How would they know you live in California? Especially with just a website?

 

[mottdog]

Depending on what you are selling you may not need a LLC to protect yourself. IE, all you need is a DBA Registering a Fictitious Business Name and then file paperwork for a business license in your city, use these to open up business bank accounts. Then register for a sellers permit at the Cali Board of Equalization Register for a Permit, License, or Account - California State Board of Equalization Then use the number they give you to get wholesale access.

However if someone sues you, then your a$$ out and they can come after everything. This is when a LLC can protect your personal assets. I'm sure GlobalWealth can explain this subject much better than me.

Point is that you can test the waters before outlaying a bunch of cash and then ramp up once the idea is sound. If your selling a new face cream, then I would most def get a LLC. A new dropship purse store? Maybe not needed yet, since the risk is low IMO.

 

[susanyang]

This is my dilemma too. I don't think I will net a lot of money when I first started. It just doesn't make sense to pay $800+ a year just to have an LLC. I am selling baby shoes, by the way. I am paranoid if some kid slip and fall, the sue happy parents will come get me because of the shoes I sold them. With that said, I think I will just go sole proprietorship and once I am more profitable I will establish an LLC.
I have also requested mentoring from my local SCORE about this issue, but my mentor hasn't responded yet.

 

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[MJ DeMarco]

How would they know you live in California?

They found me and I don't even live in California, nor do I have a CA LLC. I still had to pay.

 

[needchaser]

They found me and I don't even live in California, nor do I have a CA LLC. I still had to pay.

That sucks, thanks for the heads up. If I ever leave California for a lower taxing state and end up still having to pay taxes here, I'm gonna be pissed. issed:

 

[socaldude]

And get this. You will now have to pay California sales tax on Amazon. 10 freakin percent. Starting this month I think. Honestly this will affect how much I spend on Amazon as I really enjoyed paying less.

Amazon offered a deal to California to build facilities to create more jobs. California rejected it. Why? because they won't bring in as much taxes than if they just taxed goods. epic fail. A government that values taxes more than jobs and economics development.

Amazon Offers Jobs in California in Exchange for Tax Reprieve - WSJ.com

EDIT: sorry if I come across as political, i'm trying to state the facts as much as I can versus my own personal opinion. Also not to deviate but i think this is worth noting.

 

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[biggeemac]

I would think that since this is an ecommerce venture that this would be pretty easy. Couldnt you do a shelf company in wyoming or something? Check out Details on Wyoming Incorporation and the Advantages over a Nevada Corporation . I read about folks using this tool in more "immoral" ways(laundering, illegal businesses, etc), but i would think that something like this would be good in your situation. Basically, my understanding is that you would control the company, but you would not own it......just like Rockefeller does it. I moved to texas from cali. Good decision on my part i believe.

 

[Ivan]

California is ridiculous.

Idiotic California Law #5million: if someone lives at your house for more than 2 weeks, you have no right to kick them out without an eviction notice, even if no payment has been made.

Here's the story: one of my dad's friends invited an acquaintance to live at his property and help him remodel it (it was a rehab). The guy worked for two weeks, then stopped. He started watching TV and basically just sitting around the house. He wouldn't leave. When my dad's friend called the police, they told him he had no right to kick the guy out without a 30-day eviction notice (there was no lease agreement and the offender wasn't paying in any way). He ended up getting rid of the guy in a very creative way. That whole situation would make a good movie lol.

 

[JamesS88]

he had no right to kick the guy out without a 30-day eviction notice

My brother ran into that same problem, we have an identical law here.

He ended up getting rid of the guy in a very creative way.

Same resolution here as well, lol.

 

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