Where do I incorporate for an online business?

Business
1

Hi,

I’m looking to start an online business, which will have a few different subsidiaries. At first we’ll have a marketplace, but there are no physical items being shipped, just digital ones. Later on, we’d host tournaments for people to meet up and compete for cash prizes. This is just the gist of it, but I heard that Delaware is a good state to start a business because of its business-friendly laws. My question is, if I’m in New Jersey, and I incorporate it as an LLC or S-Corporation in Delaware, do I have to file for foreign qualification in New Jersey, since I’m living here. I ask this since it’s an online business and there are no physical warehouses or products being shipped out of New Jersey or anywhere for that matter. The website servers will most likely be hosted by a third-party, probably not in Delaware.

Also, if I hire people through freelance or over the internet and they work from home, online, do I have to file for foreign qualification in the states they’re living in?

Finally, if I’m taking angel/venture capital investors, should I incorporate as an S-Corporation or an LLC? I’ve read it’s easier to create shares as an S-Corp, but starting out, as an LLC it’s much cheaper.

Thanks in advance,
Connor

2

There are so many way of incorporation for an online business.

The process of choosing a state to incorporate an Internet business is
not substantially different than choosing where to incorporate a brick
and mortar business. You must first ask yourself where you will be
conducting all or the majority of your business. You should also
consider other business issues such as privacy and tax benefits.

See http://business-law.freeadvice.com/business-law/corporations/business_incorporate.htm

Post edited by TechnoBear to format and attribute quoted content

3

So what you’re saying is, do it where I conduct most of my business. Well, most of my business is online, which I access from my computer in New Jersey, but I’ve read most investors want a Delaware based company because of the business-friendly laws. Do I (should I) have to file for foreign qualification in New Jersey, even though it’s an online business.

As for the other questions, you didn’t answer them at all.

4

“online” is not where you do your business, it is how you do your work.

AFAIK if you were to rent a small space in a neighboring state and do most work from there you could file business taxes for that state. If you do most work from home, then you should file for that state.

In any case, contact your lawyer or the IRS, they know better than I

5

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