Ask Jade: November 2020
Welcome to another episode of Ask Jade. Today I’m going to go over a few tips for eCommerce businesses.
A lot of us are strictly online eCommerce businesses these days. A big question always is, “Where should I form or register my business?” Default answer is in your home state – where you live and do most of your work is usually the easiest and best. But of course, other states have pretty business-friendly laws. And with e-commerce, you can essentially form your business anywhere.
So, for example, Delaware – we all know that Delaware is very friendly to businesses. They have a very easy setup for LLCs, and they do not tax out of state income. Also in Nevada, no tax on business income or capital gains. Nevada also does not require you to create an operating agreement. If you are an LLC, Illinois also doesn’t require an operating agreement if you’re a solo LLC owner.
But if there’s more than one of you that own a business, even in Nevada, I always still say you should have an operating agreement. It’s a big risk to go into business with someone without an agreement, but that is something that Nevada offers. Also, Wyoming – no business tax. So you can form your entity in one of those States, and that would be perfectly fine. You would need to be on the up and up on other requirements for those States and then take advantage of what they offer.
Another big question regarding an eCommerce business – sales tax. When must your eCommerce business start charging sales tax?
Answer – you have to have a nexus with a certain state before you have to charge sales tax. Essentially, the nexus is – are you doing business there? Things to look at are: are you physically present in that state? Do you have an office in that state, a place of distribution in that state? Do you have employees in that state?
There’s also an economic nexus such as, do you have a certain number of transactions, or do you reach a certain amount of sales in that state? Some states have different thresholds. Many require as little as 200 transactions per year to form a nexus with that state and then that will require you to charge sales tax. So this is something that should be on your radar.
Also, services generally are not usually taxable. It’s usually products. I know in Illinois for sure services generally are not taxable, but again, this is something that is state-specific and should be on your radar.
As always if you have questions about it as always, feel free to reach out to the Law Office of Jade Carpenter, and I would be happy to help! See you next time.
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The materials available at or within this article and video are for information purposes only and not for the purpose of providing legal advice. You should ask an attorney to obtain advice with respect to any particular issue of problem.
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