What are the tax consequences of incorporating out of state?

Question

I am starting an internet based travel agency and I work out of home so I don't have a physical office location. I currently live in New York and state income tax level is quite high in New York. Would it be advisable to incorporate in a tax free state such as Wyoming, Nevada, Washington etc . . ? Would I have any state level tax liability to New York given this scenario? I just want to make sure that I wouldn't have to register my out of state corp as a foreign entity with New York.

Answer 1

What type of business would it be? No matter what though, if the business is based in NY you would still have to pay NY taxes, and if you incorporate in another state you would also have to file in that other state as well. I'm a CPA in Vermont (certified in MA) and can give you more advice if you would like.

Answer 2

Sorry, as long as you are living in New York and operating out of New York you must pay New York state taxes.

This is because you must pay the applicable taxes in the state you are incorporated in and in any state in which you have a physical presence.

Even if the state of incorporation charges no taxes it would still cost you more because you would have to employ an agent iin that state.  (A part time position that can be filled by a friend, relative or attorney residing in that state.)

Hope this helps

Jerry-the-bookkeeper