May 7, 2010
When Your Business Crosses State Lines
When Your Business Crosses State Lines Cliff Ennico www.creators.com "We run a number of limited liability companies in New Jersey that provide financial services. We have a number of partners who live in New York, do business out of their homes, and see New York customers in their home offices. Just yesterday I read that New York is adopting a new law requiring LLCs in New York to publish a 'legal notice' in local newspapers or else lose their legal status. Does this apply to us?" It depends on whether you are legally "doing business" in New York. Generally, unless you have an actual office address in New York, you are not doing business there legally. As long as your New York clients get all their mail from New Jersey, and mail all their payments to New Jersey, and your employees' home addresses do not appear anywhere on your business cards and stationery, you're probably not "doing business" in New York. In this case, though, it's a close call, because it sounds like you've got employees working full-time in New York and using their home offices as local "branches" of your business - from a New York customer's perspective, you sure LOOK like you have an office in New York, even though you legally don't. New York and New Jersey have signed an "interstate compact" requiring companies in one state to collect the other state's sales, use and other taxes when dealing with customers in the other state, whether or not they are legally doing business there - you're probably not doing that. I also have to believe that New York's banking authorities will be concerned about the quality of financial advice your people are giving to citizens of New York, and may want to subject your New York personnel to whatever licensing requirements apply in New York. To be safe, I would register your New Jersey LLC as a "foreign" LLC in New York and publish the legal notice - the cost is only about $200 if your employees work in counties outside of New York City. And hire an attorney who's familiar with New York consumer protection laws relating to financial services. "I set up a business in Nevada thinking it's going to save me money on taxes, but doing more research showed that it's not true. Is there a way I can transfer it to my local state without having to pay all those set up fees? Or do I need to close business there and open a new one in my state?" The short answer is "no". There are two ways you can transfer your Nevada business to your home state - you can either register the Nevada business as a "foreign" entity in your state (see previous answer), or you can set up a new entity in your home state and merge the Nevada business into it. Either way, though, you will have to pay fees ranging from $200 to $1,000. The better solution may be to simply dissolve the Nevada business and set up a new one in your home state. In most states, the taxes and fees for setting up a local, or "domestic", legal entity are lower than they are for registering a foreign (out of state) entity, and you will save a couple of hundred bucks by doing this. "How would plans to relocate in another state in the future affect my decision to incorporate an LLC in New York now? Would I pay business taxes to both New York and the state I will eventually end up in? Are taxes based on the legal address of the business or where the LLC is, or is it where you operate regardless of where your clients are?" If you're planning to move to another state in the VERY near future (within the next year), then I would hold off forming an LLC until you are settled in your new location, and then form one under that state's law. Otherwise you will be paying taxes and filing tax returns in two separate states, which makes no sense. If your move to another state is sometime more distant in the future (say, the next two to five years), then you should form a New York LLC now to get the protection from legal liability. When you do eventually move, you would shut down your New York LLC (fairly easy to do) and set up a new LLC under the laws of your new state (see previous answer). That's the best and most efficient way. "I am a non-US resident living in a foreign country. I am thinking about forming an LLC in Delaware. The Registered Agent allows me to use his address in Delaware for legal documents, bank accounts and correspondence with the IRS, but cannot be used as a mailing address to be posted on my company Web site. I found three mail forwarding services, one in Nevada, one in Texas and one in Florida. If I use these mail forwarding services for my LLC in these states, does it mean I am doing business as a foreign company in those states? For example, if I use the Florida mail forwarding service, do I need to register in Florida as a foreign company?" The short answer is "yes". Your mail forwarding service would be a legal business address in the state where the mail forwarding service is located (see first answer). You would have to register your Delaware LLC as a "foreign" LLC in that state, and register for that state's state and local taxes. Be sure to get a good tax adviser here, as you (or your U.S. bank) may also have to "withhold" taxes on amounts you take out of the LLC checking account and remit to your home country - see the instructions to IRS Form W-8ECI and IRS Publication 519, "U.S. Taxation of Aliens". Also, be prepared to answer a few questions if someone from U.S. Homeland Security contacts you, as an overseas business with no legal presence in the U.S. other than a "private mailbox" might raise a few eyebrows in U.S. intelligence circles. Cliff Ennico ( cennico@legalcareer.com ) is a syndicated columnist, author and host of the PBS television series 'Money Hunt'. His latest book is 'Small Business Survival Guide' (Adams Media, $12.95). This column is no substitute for legal, tax or financial advice, which can be furnished only by a qualified professional licensed in your state. To find out more about Cliff Ennico and other Creators Syndicate writers and cartoonists, visit our Web page at www.creators.com . COPYRIGHT 2006 CLIFFORD R. ENNICO. DISTRIBUTED BY CREATORS SYNDICATE, INC. Permission granted for use on DrLaura.com.

Posted by Staff at 1:49 AM