Running an LLC while travelling the world?
July 2, 2013 5:07 AM   Subscribe

I'm working on a few apps and I'd like to form an LLC. What complicates matters is that I plan to travel the world for the next few years, meaning that all my work will be done from my laptop with no stable office and no employees other than myself. I'm currently based in California. What are some good resources to help me figure out the best way to establish my business, both financially and legally?

I have many questions regarding LLCs. For example:
  • I know that California has an $800 tax for LLCs, but my understanding is that I only have to pay this tax if I'm "doing business" out of California. I have no idea what "doing business" means if I'm traveling around. Can I incorporate in another state? What happens if I come back to California after a few years? What if I come home to see my folks for a month? Does it matter that my home address (parents') is in California?
  • How long do I have to stay in a state/country before it counts as "doing business"? In other words, if I decide to stay in New York for a few months, will I have to register my LLC there and pay more taxes? What happens to my California payments in that case?
  • I've heard that it's legally advantageous to have a co-founder, even if they don't have any control over the company. Is this true? If so, will they get burdened with more complex taxes? Do I have to pay them? What happens if my LLC gets sued?
  • How important is a paid registered agent? I've heard that your agent needs to be accessible 24/7 in case they get a summons or something. Does that mean that I still need one even if I incorporate in California?
  • If I use a laptop 50% for work and 50% for personal use, can I pay for it with my company bank account/credit card, or does that endanger my LLC? What about writing it off my taxes?
  • I've already started on my first project. When I form my LLC, will I be able to transfer my assets to my company? Does the fact that I've been blogging about my progress have any impact on this?
As you can probably tell, I'm really confused. (So much for "it's easy!") I know I need to consult a lawyer (or multiple specialized lawyers?!), but I have absolutely no idea where to start looking for one. I have no business network, so I can't ask any colleagues where they would go for help. I have no way to judge a lawyer's competence. I certainly don't want to waste hundreds of dollars on a gamble. And I need to get this done over the course of a few weeks. What should I do?

Additionally, are there any good books on LLCs that cover some of the questions I have, particularly the ones related to travel?
posted by archagon to Work & Money (14 answers total) 6 users marked this as a favorite
You can incorporate your LLC in Delaware or Nevada. There are approximately a zillion companies that provide Delaware and Nevada incorporation services, and many will provide a free 30 minute consult. Nevada has no franchise tax, no corporate income tax and personal income tax. Delaware has franchise tax. Neither have residency or indeed, citizenship requirements.
posted by DarlingBri at 5:17 AM on July 2, 2013 [1 favorite]

You need a lawyer. You are asking for legal advice. Competent attorneys cannot provide you such advice without implicating their own ethical responsibilities, and non-attorneys should not provide legal advice at all.

What I'd do in your case is I'd make a meeting with your local SCORE chapter and bring them these questions. Ask them whether they can recommend or suggest a local attorney who is willing to help people start their small businesses or who deals with these issues.

Good luck!
posted by gauche at 5:18 AM on July 2, 2013

Response by poster: DarlingBri: I've heard of Delaware/Nevada incorporation, but I've also been warned that this won't help me avoid the $800 CA tax if I'm "doing business" out of CA.

gauche: Exactly — my question is how the heck do I find a competent lawyer, and the bullet points are mostly for context. I'll have to check out SCORE. :)
posted by archagon at 5:19 AM on July 2, 2013

You might also see if there's an economic development council or some other such thing in your town/county/region. Or a "business incubator" that can help you plan these things.
posted by gauche at 5:24 AM on July 2, 2013

You definitely should be speaking with an attorney about this. Where in California are you located? There are tons of lawyers in SF/Silicon Valley/LA who can help with this. If you're located near there just go to any of the tech-related meetups and start asking for referrals for attorneys.
posted by dfriedman at 5:45 AM on July 2, 2013

As a lawyer, I will jump in to say that most of these questions also can be answered by a CPA, and he or she can refer you to a lawyer for the legal questions.
posted by yclipse at 5:47 AM on July 2, 2013 [1 favorite]

No matter where you are just about any tech / startup related meet up will have a couple of attorneys present looking for clients.
posted by COD at 5:58 AM on July 2, 2013

I'm a US citizen and have an LLC based in the US, and I rarely set foot in the country. It's not that complicated. The following is obviously not legal advice. I actually think that rather than look for a lawyer you should look for a CPA who can advise you on both the tax implications and the long-term financial sense of the various forms of incorporation. I talked with a CPA and then did my own incorporation online, using the forms provided by the state I was in. I'm a one-person LLC, which means I get the pseudo-protection of an LLC without complicating my taxes. All of the following assumes a one-person LLC.

Your LLC remains incorporated in its state of incorporation no matter where you personally are located. I don't see why you would have to incorporate in every state you might spend time in. You pay personal income taxes based on where you live, but your LLC stays where it was born. For example, if I lived in New York long enough to establish tax residency, I would pay New York income taxes, but I would pay the LLC renewal fee to the state where I incorporated, which in my case is about $100 every two years, unless there's some law in NY that I know nothing about.

When you're a US citizen abroad, you are required to continue to pay federal tax on your earnings even if you never set foot in the country again. If you spend less than 30 days/year in the US or meet other requirements (look it up on the IRS site), you qualify for the federal earned income exemption. This means that you don't have to pay income taxes on income up to a certain amount, but you still have to pay self-employment taxes.

You are also required to have a state of residency, even if you never set foot in the country again. Whether you are required to pay taxes to that state depends on the state. So it's common for people to incorporate in a tax-free state, establish at least an address in that state if not legal residency, and take off.

I've spent years out of the country and as long as I file my taxes, no one, including my clients, cares where I am. I don't have a registered agent and suspect they're selling something that few people need. I have a US address thanks to EarthClassMail. They scan my mail and receive packages for me. I have a US phone number thanks to Skype.

For what it's worth, I'm working on an app now with a South American partner. I'm still a one-person LLC because it's simple and because the brand under which we'll release the app is mine. The LLC, aka I, will own the IP of the app, but the developer and I plan to split the earnings. We'll draw up a contract between my LLC and him as an individual.

I don't bother to try to deduct my laptop. In order to do that, the last time I checked, I would have to keep a log of my use to show what percentage was personal and what was business. When I travel I don't track expenses except for my own records; instead I use the federal per diem rates for tax deductions. When you officially live abroad, you can also deduct many of your housing costs.

There's an overview of expat taxes here. For more on the lifestyle, search for "digital nomad" or "location independent professional." For more on deductions, see DeductIt by Nolo Press.
posted by ceiba at 6:05 AM on July 2, 2013 [5 favorites]

Well, that was a wall of text. My suggestions:
- Incorporate as a one-person LLC in a state that has no income taxes.
- Establish residency in that state or at least get an address there, and sever all ties with your current state.
- Leave the US and don't come back except for short visits of less than 30 days/year.
- Pay federal self-employment taxes but no income tax on earnings up to the exemption limit.
- Don't pay state tax because "your" state doesn't require them.
- File the LLC renewal docs and fees as required from wherever you are.

I'd add:
- Keep a low profile when you're working online in other countries. Many places don't care as long as you're not taking work from a local, but I've heard that some places are starting to notice digital workers (Thailand, for example).
posted by ceiba at 6:13 AM on July 2, 2013 [1 favorite]

One more thing: In my experience a few years ago, the nice folks at SCORE knew nothing about app development or working online while traveling. They were retired brick & mortar business owners.
posted by ceiba at 6:15 AM on July 2, 2013

California is incredibly grabby. If you make a portion of your business' income in California, or your residence is based there, or if you SNEEZE in California once, you will be required to file and pay. They are nightmarish. (Haha, who's bitter about a recent forced California return?)

Being registered in Delaware is quite lovely in general however. Using one of the services, despite their fees, is quite worthwhile. (I use Incorp.)
posted by RJ Reynolds at 7:07 AM on July 2, 2013

ceiba's comment is wrong in one respect: every state that I am aware of that authorizes the creation of LLCs requires the designation of a registered agent. The purpose is to have someone to whom official notices can be served and on whom lawsuits can be served. Failure to have a registered agent can result in loss of the limited liability protection, which for most businesses is the primary motivation behind creating the LLC.
posted by megatherium at 8:32 AM on July 2, 2013 [1 favorite]

megatherium : Actually what you need is an in-state address (i.e., the u.p.s. store, etc) for such legal service, you do NOT need the registered agent "service" that many incorporation services provide for a fee.
posted by Podkayne of Pasadena at 9:21 AM on July 2, 2013

Podkayne - not true. In most states, receipt by ordinary mail (including delivery to a P.O. box) is insufficient for service of process. If the LLC is actively doing business in the state, then actual service of a person in charge at that location would (usually) be satisfactory. If not, then service at a post office box would only be sufficient if done by certified mail, which requires an authorized person to sign. Hence we get back to the need for a RA - a real person on whom service can be made if the OP is not present.
posted by megatherium at 10:46 AM on July 5, 2013

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