Should I Incorporate in Nevada for Internet Business?

I have an internet based business with no physical location and my business partners all live in different states.

I want to incorporate and was thinking about doing it in Nevada or Delaware. The state I currently reside in (Arkansas) started charging internet tax and Amazon.com refuses to allow anyone in Arkansas to be an affiliate partner because of this law, not to mention I will need to charge all customers, regardless of location, taxes.

I want to form a subchapter S corporation so that my partners will be shareholders and can pay taxes on the income their share percent earnings.

Does this sound like a good plan? I read that I would need to form it in both Nevada/Delaware and in Arkansas if I plan to do business in Arkansas. I only do business online so I am not sure if this is required or not.

I would love to incorporate in Nevada and use a mailing address there as my corporation's address and just pay state income taxes to Arkansas on what I earn from my shares. MyCorporation.com allows mail forwarding service so I think I can use that as my business address.

Is this possible? My main reason for this is to avoid the internet tax law that Arkansas put in place which is greatly hurting my business.

This is definitely something that you want to discuss with a lawyer, but to no matter what state you incorporate in, you will still have to pay sales tax on any taxable goods sold to residents of your state. Sales tax is usually based on the concept of having a "nexus" (aka a presence) in a given state. Because you, as an employee of the company, live in Arkansas - the nexus is established and you will need to pay sales tax in the state.

This sounds like you need a lawyer familiar with the cross-border taxation and regulatory issues. Do not rely on free advice you get from the internet for this sort of decision.