Normally I try to keep my tax tips to TaxLoopholes and my story of how I’m trying to turn my self-employed business into an investment here, but the line gets fuzzy.
This is one of those times because it’s something I’ve discovered that works great for anyone who has an eBiz, and especially if you are doing Affiliate Marketing.
That’s the Series LLC. You might have heard about it before but I’m finding that most of the info that is out there is misleading. You can’t set them up in any state. And some states like California have vehemently decided to NOT recognize them as they were intended.
A Series LLC allows you to set up a “mother ship” and then in a matter of a few hours have individual cells set up under the mother ship. The cells are stand alone, if you want them,, or can be disregarded and just flow up to the mother ship. If the cells are stand alone, then you can elect the tax treatment you want.
Now why is this especially helpful if you’re in eBiz? Well, one thing I’m finding is that eBiz guys should have many different entities to separate out risk, primarily from tax. For example, if you have a business that you can clearly establish in a no income tax state like Nevada or Wyoming, then you want that clearly different from your other business that is in New York that has a state income tax. But the cost starts to get crazy when you’re setting up all these different companies with all their own filing fees. The Series LLC has ONE fee and after the mother ship is set up by a professional, you can set up all the cells yourself. It’s unbelievably easy after that point.
And here’s another one - if you find that you need to have a lot of “identities” for your affiliate marketing or other eBiz, you can have each cell with their own EIN. They’ll be completely separate.
I predict that you’re going to hear more and more about this type of structure. In fact, make sure you’re signed up for my email alerts through www.TaxLoopholes.com as I’m going to be talking more about how you can save taxes, save filing fees and protect your assets better all at the same time.
December 3rd, 2008 at 1:22 am
Diane, so the Series LLC is a no-go for those of us in CA?
December 3rd, 2008 at 2:27 am
Probably won’t work in California. If you have a business (or businesses) that are clearly outside the state, then you could do it. But if you have one cell that is in California, CA is trying to claim that all the cells should be CA. And in that case, they charge the $800 franchise fee on each individual cell.
December 6th, 2008 at 2:12 pm
It’s intimidating at times…I’ll admit it. I’ve not even heard of this before! Stuff changes fast these days. I suppose its’ why a girl like you is such a hero to us all!
December 6th, 2008 at 3:23 pm
At my other site, TaxLoopholes.com, I had a super affiliate ask about relocation. She could basically live anywhere (that’s what is so great about making money off the Internet) and was looking at tax consequences of each.
Without a doubt, the worst tax situations exist if you’re in California or New York (which has its own issue with affiliates). If you can set up your business to actually make money in another state (it’s called nexus), you can live in one state and pay tax in another. That’s the best of all worlds. Nevada is my favorite because they have really good law for the Series LLC.