General Question

mytruehero's avatar

Where should I incorporate my web design business if I plan on traveling and moving frequently?

Asked by mytruehero (11points) January 12th, 2008

I’m starting a web design business, which I’d like to incorporate as an LLC. I plan on moving in the next year, and I also plan on doing work for my business while traveling overseas for extended periods.

My question is this: is it OK to incorporate in a state in which I neither live nor work? Most of my dealing with clients will happen exclusively online anyway, so traditional state boundaries seem kind of irrelevant. I was thinking of incorporating in the state where my parents live, and listing their address as my business address. This way I wouldn’t have to worry about keeping things current every time I move or travel. Is this a good / legal solution?

Observing members: 0 Composing members: 0

9 Answers

boydieshere's avatar

Apparently different states have different rules for LLCs, so you should definitely look at which states do what. Since you own your company (and as it is web design, I’m assuming you don’t have a partnership), you’ll be the sole owner (obviously) and it seems that most LLC tax rules state that the companies taxes will just go through you instead of separately.

From Wikipedia:
* Many states, including Alabama, California, Kentucky, New Jersey, New York, Pennsylvania, Tennessee, and Texas, levy a franchise tax or capital values tax on LLCs. (Beginning in 2007, Texas has replaced its franchise tax with a “margin tax”.) In essence, this franchise or business privilege tax is the “fee” the LLC pays the state for the benefit of limited liability. The franchise tax can be an amount based on revenue, an amount based on profits, or an amount based on the number of owners or the amount of capital employed in the state, or some combination of those factors, or simply a flat fee, as in Delaware. Effective in Texas for 2007 the franchise tax is replaced with the Texas Business Margin Tax. This is paid as: tax payable = revenues minus some expenses with an apportionment factor. In most states, however, the fee is nominal and only a handful charge a tax comparable to the tax imposed on corporations.
* It may be more difficult to raise financial capital for an LLC as investors may be more comfortable investing funds in the better-understood corporate form with a view toward an eventual IPO. One possible solution may be to form a new corporation and merge into it, dissolving the LLC and converting over to a corporation.
* The LLC form of organization is relatively new, and as such, some states do not fully treat LLCs in the same manner as corporations for liability purposes, instead treating them more as a disregarded entity, meaning an individual operating a business as an LLC may in such a case be treated as operating it as a sole proprietorship, or a group operating as an LLC may be treated as a general partnership, which defeats the purpose of establishing an LLC in the first place, to have limited liability (a sole proprietor has unlimited liability for the business; in the case of a partnership, the partners have joint and several liability, meaning any and all of the partners can be held liable for the business’ debts no matter how small their investment or percentage of ownership is).[citation needed]
* Although there is no statutory requirement for an operating agreement in most states, members who operate without one may run into problems.
* Some people, such as new business people, may not be familiar with the governance of LLCs. Unlike corporations, they are not required to have a board of directors or officers.
* The principals of LLCs use many different titles—e.g., member, manager, managing member, managing director, chief executive officer, president, and partner. As such, it can be difficult to determine who actually has the authority to enter into a contract on the LLC’s behalf.”

Maybe to fully answer your question, I think it would be perfectly fine to set up your business in whichever state you choose, as long as you pay the taxes.

GeauxTigers's avatar

Talk to a local accountant, but there may be some benefit to incorporating in another state, however there are extras costs that often go along with it that may negate any savings. Unless you’re making loads and loads of money, it’s likely to not be worth the hassle.

cwilbur's avatar

I am not a lawyer, but when I researched this, this is what I figured out:

In some states, you have to fire a “foreign corporation” registration if you want to pay people or own property in the corporation’s name in that state and the corporation is incorporated elsewhere. In Massachusetts (the state I live in), the cost of registering a foreign corporation is the same as incorporating here.

If you don’t intend to own physical property in the corporation’s name or pay any employees other than yourself, then you should be able to incorporate anywhere.

Your best bet is some online research at your state’s small business website and talking to a tax lawyer or accountant.

thegodfather's avatar

You may want to hold off on incorporating as an LLC for web design business. There’s going to be a lot of red tape getting off the ground, and if you aren’t sure exactly where you’ll be in a year, it might be easier to start as a sole proprietorship until you’re more settled in somewhere. I’ve been running a web development business for three years now as a sole proprietorship, and I haven’t had to get a EIN, I just use my social security number on tax forms and fill out the Schedule C EZ. So much easier and less expenses to get off the ground. Once it builds up to a more sizable level (and when I have more time to devote to it after college), I’ll be able to maybe go the LLC route or just get a business license, etc.

cwilbur's avatar

On the other hand, sole proprietorships don’t offer the same sort of legal protections as an LLC, and there’s often more paperwork involved in filing something like a fictitious name registration if you’re a sole proprietorship than if you’re an LLC. Beyond that, there’s likely to be a lot of paperwork involved in converting a sole proprietorship to an LLC.

This is not to say that you shouldn’t do it, but that you should research what the options are before you decide that one’s obviously better. Sole proprietorships do have a minimum of red tape, but that’s not the only criterion on which to decide.

thegodfather's avatar


Actually the fictitious business statement is easily filed these days and will take little time. I was able to file one for 30 bucks with a local newspaper that handled it all for me. Ten minutes and it was done. The paper work and legal fees to incorporate as an LLC on the other hand are much, much more involved.

cwilbur's avatar


Actually, the relative difficulty fictitious name depends entirely on your local jurisdiction and your situation. When I was looking at incorporating and considered filing fictitious name paperwork, it would have taken a letter from my landlady (because we were renting, not owning) and variance paperwork from the city council, including taking time off from my day job to go to zoning board meetings and going to several city council meetings, because my consulting business had my home address and that was zoned as residential. Forming an LLC, on the other hand, was much less hassle, and didn’t require dealing with local government at all.

Clearly wherever you are has much less stringent regulations for fictitious name registrations, but that doesn’t mean your experience is universal.

This is why I said “there’s often more paperwork involved in filing something like a fictitious name registration if you’re a sole proprietorship.” This is also why I recommended talking to a tax lawyer or accountant, because the answers are different in different areas. And it’s also why I included the entire last paragraph of my previous answer: that fictitious name doesn’t give you any sort of corporate legal shield, which means if a disgruntled client takes you to court, your personal assets could be toast.

I reiterate: this is not to say that you shouldn’t structure your business as a sole proprietorship, but that you should research what the options are (and that includes talking to actual professionals who are qualified to give legal advice in your jurisdiction, not just random people on Fluther) before you decide that one’s actually better. Sole proprietorships do have a minimum of red tape, but that’s not the only criterion on which to decide.

thegodfather's avatar


True. There’s no doubt that organizing as an LLC can protect you and that local laws can affect how much work goes into organizing a business. It’s worth discussing all the technicalities because going into business is never all that simple. And it’s always better to be safe than sorry.

Talking to a lawyer is extremely useful and essential. What has helped me get around some of the costs, though, is by taking advantage of colleges and universities. Many schools have centers or advisors that will take an appointment from almost anybody, or an email to a faculty member can help get these kinds of questions answered, usually for free.

Response moderated

Answer this question




to answer.

This question is in the General Section. Responses must be helpful and on-topic.

Your answer will be saved while you login or join.

Have a question? Ask Fluther!

What do you know more about?
Knowledge Networking @ Fluther