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    9 Replies Latest reply on May 24, 2012 4:20 PM by fcpayroll

    Single Member LLC Tax Question -- Resident of CA, LLC in NV

    shibuyaben Newbie
      Hi there,

      I started a company for an iphone app that I created because I didn't want my name to be used. I had talked to a lot of people regarding how to set up an LLC, and setting up the LLC in CA would have a business tax of $800 just for being in CA. So I set up the LLC in Nevada. My questions are:

      • The single member LLC is simply for this project, and since I had no clue about sales, I didn't want to make $100, and have to pay $800 just for incorporating in CA. Is there any issue with me being a CA resident and my company being in NV? I've read the definition of 'doing business in california', and I don't believe I'm doing business in CA--It was a one time application development that is owned by the LLC and will sit in NV for good.
      • If I started the business and was using my personal account in CA for several of the expenses until I got things set up, is this an issue in regards to the NV LLC? I read again that 'doing business in CA' does not include maintaining a bank account--thereby, would I actually have to have a NV bank account?
      • I also do some contracting work on the side, but that is done from my home in CA and would be sporadic throughout the year--I imagine if I put that under the LLC, then I would be considered doing business in CA?
      • Have I shot myself in the foot of trying to set up an LLC in a different state to avoid the $800 of taxes CA?
      Thanks for all the advice.
        • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
          dublincpa Scout
          While state nexus laws aren't simple, physical presence is a big determining factor.

          Do you have an office or physical presence anywhere but CA?
            • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
              shibuyaben Newbie
              Hi, I do not have a physical presence anywhere--since it was just for this iphone application, the application in my eyes was 'given' to the LLC in NV, and it simply would be distributing profits to me in CA.. All I have for the LLC is a resident agent that forwards the mail to my home in SF..
                • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
                  dublincpa Scout
                  That is where CA will probably have its hooks in you. The problem with your set up is that you have no basis that I can see to argue that anything happens outside of CA. From what you indicate, there is nothing to establish a fact pattern indicating anything other than a non resident LLC doing business in CA.

                  You have no employees, facilities, or even a mailing address outside of CA. All you seem to have is a registered agent. I can't believe for even a second that that would be enough. If you were to establish a virtual or rented office of some that might give you an arguable leg on which to stand, but that would likely cost more than $800/yr.

                  Feel free to contact me if you need more specific information.

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                    • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
                      shibuyaben Newbie
                      Thanks for the response... but to your point about anything happening outside of CA, how can you argue that anything happens INSIDE CA? Just because I live here doesn't mean that I carry on a business here. The owner of the product that is being sold is the LLC which is established in NV--

                      Which brings me to the definition of 'Doing Business In CA' at

                      This shows what CA considers to be doing business in CA, and from this, it even sounds like I can have my NV LLC's bank account in CA, and it still not be considered as CA intrastate business.
                        • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
                          dublincpa Scout
                          Does anyone else do ANYTHING for the business? Where do they do it?

                          What do YOU do for the business? Where do you do it? It has to be done somewhere and there does not appear to be anywhere else for it to be done, but CA? You are not working at your registered agent's office are you? You don't have a desk space or phone line set aside there do you? What about a Nevada business license?

                          Is there ongoing programming to the app? Are there marketing efforts to try to get the app sold? Where are those things done? From what you have said I infer that they are done from your home. That is likley nexus. You can't likely claim that business is not being conducted in CA when there is no where else for the business to be conducted and the only person conducting business on behalf of the LLC is doing all of it from CA.

                          Nexus is a facts and circumstances kind of thing. You can claim to be an NV LLC with no CA presence, but the facts indicate otherwise.

                          As I mentioned you can probably try to establish an NV presence by opening a virtual office, but that will likely cost more than the CA LLC taxes and fees saved.
                  • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
                    doubleWs Newbie

                    Hi iphone app entrepreneur


                    I hate to be the one to pass the bad news on to you but you must register in CA since the only member of the LLC resides in CA.  Your quote from the California Corporate Code is not directly related to a single-member LLC since the LLC is a pass-thru.  Theoretically your NV LLC may be of use if you move out of CA and you move to NV.  Most states will require you to register your single-member LLC in the state that you live since all the income goes to you.  The burden is on you -- not the state (why? because the state says so).  If you stick with your NV LLC you will register in CA as a foreign LLC which has basically the same rules as an LLC which was formed in the state of CA originally. 


                    I am sorry to be the one who tells you the way it is, but if you want to be legit and legal then you will have to dish over that extra money and paperwork to CA.  And to make things worse, I am afraid you will have to speak with the FTB since they will probably consider your iphone app a taxable item.  I am not a lawyer so my advice is to just investigate further with the official CA agencies:  Secretary of State (registering foreign LLC), Board of Equalization, and the Franchise Tax Board (for resellers permit)...


                    Hope this helps ... even if it is not the answer you were looking for.  Of course, you can always delay in doing any of this until they catch you and then plead ignorance, but that doesn't sit well for most people ...

                    • Re: Single Member LLC Tax Question -- Resident of CA, LLC in NV
                      fcpayroll Wayfarer

                      LLC will have to be registered as a foreign corporation doing business in CA. Check out the Secretary of State website regarding foreign corporations. I have a client that setup a NV corporation because of the same advise. They don't have to pay taxes in CA. That's incorrect, if you are doing business in CA, you still have to register your corporation or LLC with Secretary of State and pay the $ 800 annual tax.




                      Please do not take this as a legal advise. I am speaking from my experience.