Domain business based in DE, the owner resides in IL...?

[ab80]

Hello folks,

I live in Chicago, Il. and we have been planning on opening a new corporation (function will essentially be domain sales and acquisition) in Delaware. We were wondering if we MUST register our business in IL too as "foreign entity"(?) The primary reason for us to think of forming the company in DE is lesser taxes and formation fees.

Is there any issues that we might end up having by not registering the company in our state of residence (opening company bank account in IL, state taxes issues etc)?

Any information or comments will be much appreciated.

cheers!

 

[eeedc]

I have had/have a few Deleware corporations and they are easy to set up.

But if IL is like most other states, you are also supposed to REGISTER in your own state also, which doubles paperwork. Of course many people with small part-time, or online businesses fly under the radar in their home states. But if you have a storefront, a few employees, or doing a large business, it's not that easy to fly under the radar.

Also watch out for DE registered agent fees that increase every year. I used Harvard Business Services which had low and fixed rates.
https://www.delawareinc.com/index.cfm

 

[eeedc]

all I ever needed for a corporate bank account were the incorporation papers and a federal tax id number (free)

and I was assuming that any income was passed through to you or the "partners" so your IL taxes are paid. If you start making tens or hundreds of thousands of dollars and don't pay IL, how does that song go... "IL wants me ..."

---------- Post added at 07:15 PM ---------- Previous post was at 07:10 PM ----------

I think I have my song lyrics mixed up. It's "Indiana wants me"

 

[Jack Gordon]

I agree that forming a corporation is Delaware for a small business is probably overkill.

I can't speak to the regulatory climate in Illinois, but I have set up one S-Corp and four LLCs in Michigan, and it really is no big deal. I can't imagine Illinois is much worse.

 

[Domagon]

For a very small business with say less than a million or so annual gross revenue, it's generally more straight forward to do so in the state the company is physically located in. Incorporating elsewhere can potentially save money, but often not worth the hassles and potential risks. Simple is often better unless one is doing millions in business and can justify paying for "creative", legal accounting and structures to further minimize tax / legal liabilities.

You use the word "we" ... not sure if you mean that literally ... but if you're planning to incorporate with another person(s), imho, that's a more pressing issue to deal with verses where to incorporate.

The do-it-yourself incorporation places are generally perfectly fine for single owner entities, but if more than one owner, hire an experienced business attorney to assist in forming the entity to forestall potential future problems, such as one or more of the other owners seeking to sell their share, severe business disagreements, misappropriation of assets, etc.

Anyways, if the corporation is setup as a pass-through entity, which is most likely, you're likely not going to save much, if anything unless the gross profit is relatively high and/or asset holdings are of relatively high value.

In short, for very small businesses, foreign incorporation gives a sense of false security / false savings that often doesn't exist.

Ron