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Business formation for Internet company

Asked by: B  — 27 July, 2011

I am forming an internet only company that will provide only a service for the end user. I am looking to incorporate in Nevada or Wyoming but spoke with a CPA (not really internet literate) that wants me to file in my home state so I am not treated as a foreign corporation. My question is since I will not have a storefront or offices in my home state and all servers are out of the country do I need to really file as a foreign corporation for each state? Furthermore can anyone recommend a good CPA or Lawyer that I can speak with that is well versed in internet business? Thanks in advance for your time.

Answered by: admin  — 27 July, 2011


I would guess your CPA advised you to incorporate in your state because s/he assumed that you will be deducting business related expenses in your state, such as (for example) some of the rent for home office, meals, travel etc.

We do not provide tax advise, however if your business will be purely Internet-based with all expenses related only to maintenance of the sites, advertising, IT and R&D expenses (such as freelancers/contractors that you will hire to do work) and such, then your business relation to your state (or any state for that matter) would be minimal.

You are absolutely correct about seeking professional advise from a CPA. I would recommend you to ask your CPA why in his/her opinion your company would be treated as Foreign Corporation, and make sure you mention exactly what types of expenses you think you will deduct.

It is possible that your CPA will actually advise you to deduct more expenses related to your personal management of the company, in which case you will need to either register the company in your state, or register in WY or NV and then register Foreign Entity in your state. It is important to consider all scenarios and pick one that fits your personal situation best.

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