Below are five common myths about incorporating a website. I base this list on feedback I have received from feedback from hundreds of thousands of visitor to my website about forming limited liability companies.
1. You have to form a separate limited liability company (LLC) or corporation for each domain name.
This is entirely untrue. You absolutely do not have to form separate entities for each and every domain name your business operates under.
A business entity serves two purposes. One is to limit, or contain, all liability within the entity and prevent liability from “spilling” out to affect your personal assets or the assets of other businesses you own. The second is to create separate accounting.
2. A corporation or LLC can’t own a domain name.
Of course a corporation or LLC can own a domain name. In fact, it’s probably a good idea to have your corporation or LLC own your domain names, as it protects you from personal liability in case the domain name is misused.
For example, you might innocently register a domain name that infringes on a company’s trademark. If the company is particularly nasty, it might accuse you of cyber-squatting and sue you. By having the domain registered in the name of an LLC or corporation, the only assets this vindictive plaintiff could go after would be the LLC’s or corporation’s, and not your personal house, car, bank account, etc.
3. I have to form my corporation/LLC in the same state in which my website is hosted.
Not at all. Your LLC should be formed in the state in which you do business. For a home-based internet business, that means forming your company in your home state.
The location of your website’s server is basically irrelevant.
4. If I ship goods as part of my internet business, I have to form a corporation/LLC or register to do business in every state where I ship product.
No no no. You only have to register as a foreign corporation/LLC (by “foreign”, they mean formed in another state, not corporations from outside the US) in states where you transact business. Transaction of business is a technical, legal term, and it does not include mere advertisement or shipping of goods into the state.
5. I won’t be able to sell my domain name or business if it is owned by a corporation or LLC.
Many people purchase domain names and start internet businesses with the intent to sell them at a profit on website marketplaces like Sitepoint.com or Digitalpoint.
I have been asked before if it’s true that a corporation (or LLC) that owns a domain can’t sell that domain. That’s absolutely not so.
A corporation or LLC can sell any asset, just like an individual can. A domain name is an asset. So is the content contained on that domain, along with customer lists, software, etc. Any and all of those assets can be sold by an LLC or corporation.