Incorporating at delaware

[silicon]

i wanted Incorporate at delaware so that I get least tax until I started billing. It may take around two years to get going. However, I am in california and the state taxes $800 if I register with CA, whether I make money or not.

If I inc with delaware, and I do not bill or invoice (Basically, I wanted to protect my intectual rights), will there be any issue?

Thanks,

silicon

[Sagewing]

The only issue wil be that you might be wasting your time and money. A corporation doesn't necessarily protect your intellectual property any more than you could as a sole proprietor. IP protection is a legal matter which requires good agreements, licensing, copyright, and patent practices among other things. Intellectual property that's held by a single person corp (in any state) isn't much different than the same property if held by an individual.

If you aren't going to be billing, you MAY not be subject to California FTB taxes (which, by the way, are $800 minimum not just a flat $800) but you'll still have to file taxes for the dormant Delaware corp. You might not owe taxes to Delaware, but you could certainly wind up paying a CPA to prepare the returns.

When you do start doing business, you could be forced to register your Delaware corp as a foriegn entity in Cali, which cost around $600 last time I checked. When you add in the annual fee for registered agent service in Delaware, you aren't really ahead in that circumstance unless you are making quite a bit of money.

Now, if you are in a position to take a significant loss in your Delaware corp that might be a different story. If you set up as a pass-through (s-corp or llc filing as partnership) then you could potentially take the loss against your personal taxes which could be good. This, however, requires some real knowledge of the tax code.

Check out Nolo Press for great resources about this kind of thing. I recommend you research all the options and review your objectives before jumping into anything. You can always incoporate but it's not so easy to unincorporate! Good luck

[Dan Schulz]

Sagewing really hit the nail on the head. Also, I'd advise you to talk to an attorney that specializes in business law that caters to small businesses about the various business structures (sole proprietership, partnerships, limited liability companies, limited liability partnerships, corporations, S-Corps, etc...) and work out which type of structure is best for you, your business, and your short term (five year) goals before you do or sign ANYTHING. You may also want to consult with an accountant to discuss the various tax advantages and disadvantages of each business model and how they apply to your business.