California LLC Tax Help?

Where should I open up an LLC in other state for tax advantage if I am residing and operating in California?

• I am currently developing a marketplace startup where it will be providing place for people to sell and buy services.  I am a US permanent resident residing in California.  I intent to open in other state because I intent to keep my cost down due to $800 LLC California annual tax. Which state that would allow me to get tax advantage (minimal tax) while I am residing and operating in California?  I would think that in the first year, I may incur losses. What are the requirements for me to file the LLC in this state? Thanks.

• Answer:

  This issue comes up so frequently that I blogged about it more than three years ago (http://danashultz.com/blog/2010/05/24/doing-business-in-ca-be-sure-to-register/). While provided the correct answer, he is incorrect in stating that there is not a relevant explicit definition. Quoting from the post cited above: Sometimes California-based entrepreneurs think that they can avoid CA  registration fees and taxes by forming their business entities in  another state. Usually, that belief is incorrect. If  the entity is doing business in CA, then it must register with the CA  Secretary of State, even if the entity was formed elsewhere. So what constitutes “doing business” in CA? The term used in the Corporations Code is to “transact intrastate business”. That term is defined as “entering into repeated and successive transactions of its business in this state, other than interstate or foreign commerce”. (That term is defined in http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=00001-01000&file=100-195 for corporations and http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=16001-17000&file=17000-17005 for limited liability companies). Any foreign (non-CA) startup that is  headquartered  in CA is likely to enter into “repeated and successive  transactions” with suppliers, customers and other businesses that are  located in the state. This is true even if the business is operating a  website on servers located thousands of miles away. As a result, the  entity will need to register in CA. Indeed, registration is required before transacting intrastate business (http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=02001-03000&file=2100-2117.1for corporations, http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=17001-18000&file=17450-17457 for LLCs). A foreign entity that conducts intrastate business without registering is subject to financial penalties and is precluded from maintaining in California courts actions arising from such business (http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=02001-03000&file=2200-2260 for corporations, http://www.leginfo.ca.gov/cgi-bin/displaycode?section=corp&group=17001-18000&file=17450-17457  for LLCs). If you are in CA running a business - even an online one - it is highly likely that you will be "doing business", thus required to register in CA.This answer is not a substitute for professional legal advice....