DBA, LLC, or what? For a virtual asset marketplace


My friend and I are currently developing a marketplace for virtual assets. However we are not quite sure how we should set the company up. Do we need only a DBA, or should we go with the LLC route in order to shield ourselves from potential liability as the company would be acting as a mediator of transactions between two other parties.

I am thinking LLC would be best, but maybe I am way off base in my thinking. If LLC is the way to go should I find someone local to help me set that up, or is there a good online service that anyone would recommend?

LLC Business USA DBA

asked Mar 26 '13 at 05:47
6 points
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  • What state/country are you talking about? DBA/LLC these are legal terms defined by local laws. – Littleadv 10 years ago
  • US, we are located in Michigan – Sharkman 10 years ago
  • In the US Nevada is a great place to incorporate (s corp) or LLC yourself. They have great tax laws for business and are very small business friendly. Check it out, you can do it online and are not required to live or have a physical presence in the state (due to the nature of online business). – Snake Doc 10 years ago
  • @SnakeDoc total and complete nonsense. There's no reason whatsoever why would a US person setup an LLC in a state other than the one he lives in. Nexus in MI exists, setting up LLC in Nevada adds nothing, takes money effort and time. What's the benefit? NONE. – Littleadv 10 years ago
  • @littleadv the advantage is taxes. Nevada is a "tax shelter" state who's laws and taxes strongly favor small businesses. The same cannot be said about all states, such as California (which is almost the complete opposite). So it is adventageous to incorporate or LLC in another state if that state A) permits out of state business (no physical presence) and B) has more favorable laws/taxes for small business. -- Please research this before stating there is no benefit. – Snake Doc 10 years ago
  • @littleadv here's some more info for you to read up on - http://grasshopper.com/blog/2010/07/a-concise-guide-to-the-7-best-states-for-incorporating/Snake Doc 10 years ago
  • @Snake yes, please research. No such advantage. Nevada is not a tax shelter. The OP is in Michigan, is subject to Michigan taxes, and organizing the LLC in Nevada has no affect on that. There's no advantage for an American to incorporate anywhere other than their own state, tax-wise (there are advantages when talking about corporations and dealing with investors, but it is irrelevant to this discussion). – Littleadv 10 years ago
  • @Snake yes, I've seen this and many other articles on the matter. It doesn't make it any less nonsense. I suggest you discuss it with a decent CPA/EA. – Littleadv 10 years ago
  • @littleadv for an online business, there is little reason to stick with your own state unless that state has favorable laws to support you and your business. Haven't you ever wondered why so many corporations all seem to be based in the same cities/states? It's because those locations (states) have more favorable laws that benefit them. Places like California are very tough on small business, with fees and taxes like crazy. For someone starting a new buesiness, the fees and taxes alone can be enough to put them under. Incorporating in Nevada would make more sense, you only pay the biz license. – Snake Doc 10 years ago
  • @Snake again - you're ignoring the fact that the OP has nexus in Michigan. Its not the business, its the OP. We're talking about LLC here, not corporation. Regardless, even incorporating (creating a corporation) won't change anything in *this* case, for the very same reason. If you're a Californian trying to hide from the FTB LLC fee by creating your LLC in Nevada - you're bound to a very nasty surprise. And you will not be the first one. – Littleadv 10 years ago
  • @Snake BTW: "It's because those locations (states) have more favorable laws that benefit them". In most cases, its because of the legal protections, not the taxes. – Littleadv 10 years ago
  • @littleadv if there is no physical presence (retail store for example) within the state, then you are free to incorporate anywhere you choose. Some states require you to live in the state you incorporate under, Nevada does not. The OP is selling stuff online, and thusly has no physical presence anywhere. If they find Michigan has particulaly ugly taxes/fees and/or not the right protection, they are free to, and should look elsewhere. The OP would hold a position with the company (CEO or whatever) but can live anywhere they choose (not have to live where the business is incorporated). – Snake Doc 10 years ago
  • the OP asked about LLC because it seems that is what they were more familiar with. an S Corp might be a better option if they sell online and want/need to incorporate outside their state. – Snake Doc 10 years ago
  • @littleadv as you said, the OP lives in Michigan, and therefore is subject to Michigan law and taxes. But there is no law that says the OP cannot be a member of an out-of-state business. The coproation's taxes are not tied to the OP, which one reason why they are looking to found a real business instead of being a contractor. With a setup like this, the business would be subject to state law where it is founded, not where it's employees live. – Snake Doc 10 years ago
  • @Snake " if there is no physical presence (retail store for example) within the state, then you are free to incorporate anywhere you choose." - But there **is**. The OP is not in India or Canada. The OP is in Michigan. Thus - you have nexus in Michigan. Incorporating in Nevada doesn't change it. " thusly has no physical presence anywhere" - **not true**, the OP has physical presence. He has weight, height, he's probably not transparent, and is likely to occupy some volume. – Littleadv 10 years ago
  • @Snake "The coproation's taxes are not tied to the OP" - says who? "With a setup like this, the business would be subject to state law where it is founded, not where it's employees live" - plain wrong. – Littleadv 10 years ago
  • @littleadv it depends how the business is structured, but incorporating typically is done to protect the members, and therefore taxes and liability would normally be shifted to the business entity, off of the individuals (who are employees for all intensive purposes). You're basically saying someone cannot occupy the CEO position simply because they live in another state. That's not true. The OP would essentially be an employee and therefore can live anywhere they choose. Having nexus in MI would only matter if they had physical stores or planned to do majority of business in-state. – Snake Doc 10 years ago
  • @Snake again - wrong. There's no relation between the legal protections of incorporation and taxes. LLC's are pass-through entities, in most states. Having incorporated in NE has no bearing at all. Re the corporations - read about the MI nexus law: http://www.michigan.gov/taxes/0,4676,7-238-47449-176066--F,00.html Note that the sales don't have to be in MI. Its the **solicitation** that counts. And operating the website definitely counts as solicitation. – Littleadv 10 years ago
  • @Snake - I suggest you get your CPA on the phone before we continue this discussion. You obviously have no idea of what you're talking about, and believe me - I do. – Littleadv 10 years ago
  • @littleadv if the website is hosted outside of the state (it likely is) then its not being operated from that state. What you are saying is if the OP moves, then they must re-incorporated. Not true at all. The business becomes it's own entity after incorporation, having it's own responsibilities and subject to it's own laws (from the state it's filed under). The OP can live anywhere they like and it has no bearing on the corporation. It's an online business we are discussing, not a physical business. It's rather common for online business to inc. somewhere outside where the employees live. – Snake Doc 10 years ago
  • The best and most blantant example of this is Facebook - Facebook is incorporated in Massachusetts, however all founding members live in California, the company HQ is in California, and no founding member has ever lived in Massachusetts. Case and Point. – Snake Doc 10 years ago
  • @Snake case and point what? You think they don't pay taxes in CA? You're more than wrong. (No founding member have ever lived in MA? Are you for real???) – Littleadv 10 years ago
  • @Snake I suggest you, again, to call your CPA. If all you know is from reading blogs on the Internet, you'll pay dearly for your ignorance. In these matters - you either deal with a professional, or not deal at all. Taxes is not a game for amateurs to play. – Littleadv 10 years ago
  • @littleadv it appears you have great knowledge over how incorporating works, however it also appears that your knowledge of online business might need touching up. Yes, no founding member has ever had residence in MA, Zuck was born in NY, lives in CA and attended school in MA for a short period. Not residence. - The OP is free to inc. anywhere that benefits them. The business entity is responsible to follow laws in places they operate, which may or may not be where the employees live. – Snake Doc 10 years ago
  • @Snake Zuck has attended school in MA in 2004. Surprise surprise - that's when Facebook Inc. was registered! Wow, you must be shocked - Zuck incorporated **in the state he lived in**!!! – Littleadv 10 years ago
  • The OP is free to incorporate anywhere that benefits them, no disagreements here. The disagreement is with your assumption that mere incorporation elsewhere magically removes the tax nexus in MI. That's what is wrong, and it looks that you're so eager to believe that your avoiding the FTB taxes is not breaking that law, that you refuse to understand that point. – Littleadv 10 years ago
  • @littleadv he did not have residence in that state when it was incorporated. His residence was in NY. -- another clear example of why to inc outside your state: CA has biz license fee, + biz taxes based on income. If you biz income is under a certain thresh-hold, then your biz is liable for a flat rate tax. In CA, the minimum tax for s corp is $800 on top of the biz license. For most small businesses, this puts them in the red from the start. Inc. in Nevada and all you pay is Biz license and go from there. NV no biz income tax nor personal income tax. You are at an advantage. – Snake Doc 10 years ago
  • @Snake I'm not sure I know what you mean by "he didn't have residence". Care to explain? You are probably thinking about tuition, but we're talking here about taxes. Check again. As to CA - I live in CA, and I know the CA law very well on the matter. If you incorporate in NE, but still live in CA - you're still liable for all the same fees and taxes, and there's been numerous cases where the FTB dragged people to courts for trying to avoid its fees in the way you're describing. If you do what you just described - get a lawyer, you're in trouble. – Littleadv 10 years ago
  • if his business primarily operated out of CA, then you'd be right. If he lived in CA, then he (himself) would be responsible for CA's income taxes and laws. This does not change the fact the biz can be located anywhere and is subject to the laws where it operates. The OP is only an employee of the biz and thusly is free to live wherever they see fit. – Snake Doc 10 years ago
  • @Snake " This does not change the fact the biz can be located anywhere and is subject to the laws where it operates." - yes, it in fact does. The States don't like people off-shoring their income, and that's why the term "nexus" is used. If you're the SMLLC owner, and you incorporate in NE while living in CA - the LLC has nexus in CA and is liable for all the taxes a foreign LLC in CA is liable for, which are exactly the same as domestic LLC taxes. Similarly, in all the other States. The LLC nexus laws are more or less uniform. – Littleadv 10 years ago
  • @littleadv i'm talking about S corps, not LLC. With an S Corp isn't not about "people off-shoring their income", it's about the business entity. LLC's are subject to different laws because it is a different business type. It becomes it's own "thing" once it's incorporated. You the founder are no longer the "owner" but mearly an employee with stake in the company (as if you owned a bunch of shares of say Microsoft). No different and you the individual can live anywhere and it does not effect the business entity. The business has not "moved" in a sense, and is still subject to it's state's laws. – Snake Doc 10 years ago
  • @Snake But S-Corp doesn't pay any taxes, it distributes K-1 to owners (and/or salary, which still is taxed by your residency state). Owners then pay their own taxes in their own states, in addition (or regardless of) what the S-Corp paid to the state of incorporation and the states where the income is sourced. So not only is it irrelevant, it actually again shows that you don't understand the matter. – Littleadv 10 years ago
  • @Snake by the way, owning a stake in S-Corp is **not** the same as if you owned a bunch of shares of, say, Microsoft. Not by far! – Littleadv 10 years ago
  • Guys, this discussion is too long, and not directly related to the posted question. Please move this to chat. – Zuly Gonzalez 10 years ago

1 Answer


I'm not a lawyer, and you should definitely talk to one for a proper legal advice. But to me it seems like LLC is the better way to go for you. Both because being a "mediator" means that ultimately someone is going to be unhappy, and because you have a partner and you wouldn't want the mistakes of one of you to become the liabilities for the other.

But again - talk to a licensed attorney for a proper legal advice, don't just rely on freebies from forum amateurs.

As to how - there are plenty of on-line sites that can assist you with the formalities (e.g.: legalZoom, Northwest Registered Agents, myLLC, etc etc, just Google "business formation"). You can, of course, do it on your own, just read the instructions on your State's Department of Licensing site.

However the Operating Agreement that would govern your entity (whether its a partnership under DBA or a LLC) should be drafted by a lawyer, or at least with some legal counsel. This would be the contract between you and your partner, and it should cover all the operational details, and all the points to consider when problems arise.

Don't just use the default templates you can find on the Internet for free, those may be good for a single-member LLC where the member can always change things, but when you have partners - changes may become a problem.

Bottom line - talk to an attorney in your State.

answered Mar 26 '13 at 08:21
5,090 points
  • Thank you for your advice. – Sharkman 10 years ago
  • also check into S Corp. It depends how you want to structure your business of course, but it offers great protection and benefits as well. – Snake Doc 10 years ago
  • @SnakeDoc another misconception. S-Corp has hidden costs that way overcome the benefits it offers. LLC can be converted to a S-Corp any time, so I suggest sticking to the more flexible structure at the beginning. If Corp structure is needed - you can go there when the time comes. – Littleadv 10 years ago
  • @littleadv here we actually agree on something. S Corp has benefits, but also drawbacks. Most S Corps do start as LLC and then convert when needed. To become an S corp in most places you must first inc as a C corp, then apply to be a S corp. – Snake Doc 10 years ago
  • @SnakeDoc not in most places, in **all** places. The "S" is an election, C-Corp is the "basic" way the corporations are created. If you want to be treated other than the default - you have to be eligible and to pro-actively "check the box". – Littleadv 10 years ago
  • @littleadv thanks, i didn't know if that was everywhere since some states do not recognize S Corps. – Snake Doc 10 years ago
  • @Snake Its actually a Federal tax classification (from legal protection standpoint, there's no difference between C-Corp and S-Corp), and indeed there are states that don't conform, which is another negative point for S-Corps:) – Littleadv 10 years ago
  • @littleadv I knew that, even States that don't recognize S Corps still treat them as such. Sort of silly actually... – Snake Doc 10 years ago

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