# At what point do you register your business entity?



## sharps (Nov 14, 2007)

Im wondering at what point is it smart to register as a business and if it is possible to backlog business expenses before you register. To me it would make sense that these expenses should be recognized as helping to form the business so really you should register your company once you anticipate sales to start. Also is there a smart time of year, perhaps after tax season?

On a seperate note has anyone had experience with the Delaware LLC? Something like 70% of all LLC's internationally are registered in Delaware because this LLC is the best legally protected. Does anyone know what the annual fee is for this? California is $800 per year. TIA.


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## binki (Jul 16, 2006)

First off, if you recognize you expenses as start up costs then you must amortize them over 5 years. They must be true startup expenses and you will probably have some. You probably cannot take equipment and inventory expenses and save them up but recognize revenue from sales of the same using the equipment. Talk with a CPA about that one. 

Don't waste your time with Delaware, Nevada, or any other location other than where you are. You will still have to register in California as a foreign entity, still pay the $800, and you will double your paperwork and increase your expenses since you will have to have an agent for service in the out of state location as well as in California. 

There is a lot of discussion here about starting as a DBA and then converting to an LLC or Corporation. I would say to pick where you want to be and just file that way. You will get into issues of transfer of assets when you change companies and may end up having to pay sales tax on the assets when you change entity types. You just can't hand over the assets of one entity to another as if nothing ever happened. The State of California will pick up on that one right away when you change your sellers permit. 

If you register as a C-Corp, your fiscal year can end on the last day of any month. If you pick June 30th or just about any other month other than November/December/Jan/Feb/March then your accountant has all the time in the world to work on your taxes. 

You should probably work out your strategy with a CPA before doing anything. Our guy gave us 1 hour of free time before we did anything. It was a big help and we were able to start out on the right foot. 

I wrote this several years ago after 2 years of research. Your mileage may vary
http://www.t-shirtforums.com/t-shirt-articles/t17054.html

Good luck.


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## sharps (Nov 14, 2007)

Thanks Fred, I really appreciate your input and the guide. 

I am going to investigate backlogging startup expenses further. Its really just a safety net to not invest the business registration fees until the business model is tested, and originially i thought that it would save on taxes until im making money. 

Now it seems the tax thing shouldnt be a problem if im still operating at a loss. Only thing would be investments that I obviously dont want taxed.


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