Question – What if I want to start an online business with someone from another state? I am in Iowa and She is in Indiana!

Our Answer – 

The location of a partner isn’t a concern to getting started. You could start a partnership, corporation or LLC but it would have to be organized in one state.

Typically you would be better off choosing the state where the activity of the business happens, so for instance let’s assume with your online company you are the active owner and you have a team doing fulfillment, call center, etc. in Iowa and your partner is more or less a silent partner in Indiana who has invested money. In this case, you would probably be best forming an Iowa entity.

If your online business is completely online with no employees and the both of you work more or less equally, it’s a toss up where you would want to form and would likely look to the state with the lowest tax burden. If there’s ever a thought of having local employees in the future, you would probably want to choose the state where those employees would be working since otherwise you would likely need to file as a foreign entity and pay entity fees for two states, in addition to tax reports to those states.

A lot of factors to consider so I hope this helps.