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Comment by Alupis | Hacker News Reader

In CA, if your gross under a certain revenue, you owe a base amount in taxes ($800 in taxes + your biz license and other fees). If you are over a certain revenue, then you owe a percentage (which comes out to equal or greater than the $800 + biz license and fees). [1]

This sucks a lot for small side businesses/projects, most of which may not even make $800 in the first year. It's a very anti-small business law/tax, which is why a lot of internet based companies incorporate out of state like Nevada where their tax liability is significantly lower or none at all.

[1] https://www.ftb.ca.gov/businesses/bus_structures/LLCompany.s...

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Sadly - if any aspect of your business is conducted in California (e.g. you reside there) - that minimum $800++ is still owed - regardless of where it's incorporated.

Is that true even if you are an online-only business? As-in, you have no physical presence in CA except you (as an employee of your own company) happen to live here?

I've honestly not looked into it any further -- for my side consulting gig which I do maybe once or twice a year, it's just not financially worth while to incorporate in CA... so, I go undocumented (which means I forfeit any protections an LLC or s-corp could provide me) and CA looses out on all taxes, biz license fees, and any other fees... instead of just some... really a lose-lose situation.

It depends.

The California Corporation Code states that merely residing in the state does not mean you are required to register as a foreign (out of state) LLC and pay the $800. If your LLC is registered elsewhere, and your business is 100% internet only and doesn't have any employees, property, etc in the state, then you are probably fine. Obviously talking to a real lawyer about your specific case is a good idea.

Keep in mind though that you WILL still have to pay California income tax on whatever your share of the LLC's profits is.

See 17708.03 10.c here:

http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&g...

If your project is so small that $800 a year is going to hurt it them maybe it's not ready to be an LLC yet. Not that I think cA is a great state to incorporate in, but limited liability is a really significant legal privilege, so I think of minimum taxes like this as a disincentive for shell companies/fly-by-night setups.

Not necessarily. Most businesses lose money the first year -- so add that with a minimum payment to the state of around $1,200+, and that becomes a significant discouragement to even try to start your own business.

Bootstrapping a side gig until it's large enough to sustain oneself becomes much more of an unfair challenge (when compared to other states) -- yet I have a feeling shell companies don't have an issue as they are usually backed by another already incorporated company, etc.

So it serves nothing but to be a giant roadblock for small businesses to get off the ground... at a time when we are supposed to, as a country, be promoting small businesses as they are the real job creators in the market.

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