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I am looking to form an Partner LLC in one of the tax haven states. I have been looking up the Pro's and Con's of doing this and it seems the major Con is that you still have to file and pay fee's in your home state if you are considered "Doing Business" in that state.

I will be Living in CA and will create (produce manufacture) a product from my home and then sell it on a website that I will be hosting (from home or out of state) and various other websites.

I will not have any property under the LLC's name and will not be hiring any employees or paying a payroll outside of the Partner and I and the general Pass through.

I feel that due to these reasons I will not be conducting Business in the state of CA and thus will not be required to file / pay fees etc in the state. Can anyone verify this?

Thanks

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1 Answer

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There's no such thing as "tax haven states". There are states that don't charge income tax, but that is only true to the income derived in those states and the states' residents.

I will be Living in CA and will create (produce manufacture) a product from my home

Stopped reading here. You're doing business in CA, you're liable for the LLC fee and the $800 franchise tax, and you will also have to pay CA income taxes on your income.

The actual place of incorporation/LLC registration is of no importance, if its not CA - you have to register as a foreign entity with the SOS and pay all the same as domestic LLC (except that the fees are higher slightly, and you have to pay a foreign state for registration as well).

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+1. As you're creating the product from your home in California, you're considered as having a presence there. If you have a presence there you will likely have to register there, and also pay sales taxes for anything that's sold in California. – Randy E Jan 11 at 4:28
So having nothing physical with my company name on it in the state of CA still concludes doing business in it? I was lead to believe that you have to have an office, space, employees under a payroll in CA in order to be considered doing business in the state. – user22258 Jan 11 at 5:47
Well, you are doing business in California. The fact that you registered your company elsewhere doesn't change it. Unless the business you described has nothing to do with the company, your work on behalf of the company in California makes the company subject to CA laws. – littleadv Jan 11 at 6:47
The rule of thumb is that if you have products or money beginning or ending in a state, it's likely "doing business" in that state. We've been able to avoid it for years by not having a physical presence in a given state, but they're starting to crack down on that. :( – CaseySoftware Jan 11 at 6:54
@CaseySoftware you're talking about the notorious tax discount for companies without presence? Good riddance, finally Californians doing what's right. – littleadv Jan 11 at 7:02

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