I live in Maryland and have no plans to move but I want to create a LLC in Nevada for tax purposes. I am an affiliate marketer and make my living online through various websites I own.
I act as a middle man for different companies that sell services. I collect leads/traffic on my websites and send it to the actual provider of the service.
I file as a sole proprietor right now and do not have any employees nor do I plan on having any. I don't actually conduct any business in Maryland or sell any physical products, period.
I want to make sure I have no obligation to pay Maryland income taxes if I create a LLC in Nevada and it's 100% legal. I'm not looking to do anything shady just looking for LEGAL tax sheltering.
Kenneth I should have mentioned I don't have a physical business address in Maryland I work out of my home. If I have a LLC in Nevada and all the income from that business goes through a bank account registered in my Nevada business name are saying I will still have to pay Maryland income tax on that income? Nevada doesn't have state tax which is one reason I wanted to create the LLC there. * Also do you have an office in Southern MD?
I fear you may have received some unsound advice. There are no tax advantages of any consequence in organizing in Nevada. For many years Delaware has been the state of choice for many companies for both LLC's and corporations, as they are efficient, reasonable in cost, and provide awesome service. They also have good case law when legal issues arise and progressive statutes that favor business. I use Delaware for clients whenever I can.
In recent years Nevada has sought to be a competitor. Delaware allows a company to organize there without a physical presence in the state. One's registered agent fills that purpose and the company I use charges $50 annually for the service. I have not explored Nevada's fees, but I know Delaware's are relatively modest. One does not pay tax in Delaware for a Delaware company unless the business actually operates in Delaware.
If you operate from Maryland you will pay income tax on earnings in Maryland. You will also likely pay the state personal property tax. There is no way to escape the state income tax that I know of. Practically, by operating in Maryland your company takes advantage of MD services and therefore, like you and I, it pays taxes.
I am admitted in Maryland and represent a number of companies here. When possible I organize in Delaware and register as a foreign company in Maryland. However, that does not evade income tax in Maryland.
Finally, if tax savings is part of your goal you might be better off with an S corporation than with an LLC. There are potential tax advantages with the S corporation. You can achieve them with an LLC by electing S taxation, but it seems a bit cumbersome. As my accountant says, if you are going to be taxed as an S corporation why not be an S corporation. You may wish to read my Avvo article on the subject.
I would be happy to discuss if you like.
Cicero, Mehta & Sprang, LLP
I agree with attorney Sprang. You may have received bad advice, and/or have misconceived ideas about avoiding Maryland Tax if you live in Maryland. I have written computer tax programs for Maryland, and you can be sure that MD will tax your income from the entity you chose if you live there.
I also agree that an S Corp. may be your entity of choice if you are solely providing services. You should at least seek the counsel of an attorney for a consultation before you form your business entity. Sounds like attorney Sprang would be a good choice as he practices in DC!
THESE COMMENTS ARE NOT LEGAL ADVICE. They are provided for informational purposes only. Actual legal advice can only be provided after consultation by an attorney licensed in your jurisdiction. The answer to question does not create an attorney-client relationship or otherwise require further consultation. Mr. Smith is licensed to practice law throughout the state of California with offices in Los Angeles County. He is authorized to handle IRS matters throughout the United States, and is also licensed to practice before the United States Tax Court. His phone number is 323-292-4116 or his email address is firstname.lastname@example.org.
Employment / Labor Attorney
If you reside in Maryland, you will definitely be taxed on your world-wide taxable income regardless of where it is earned. Even if Nevada has no income tax, your Nevada LLC income will pass through on your federal and Maryland returns. If you want to stop paying Maryland taxes you must relocate out of state formally. Good luck!