I am in the stages of planning a technology consulting business. I've been doing this on the side for a number of years as a sole proprietorship but want to start as a corporation for liability reasons. I am looking at incorporating as an Illinois (the state I live in) LLC.
I have been doing business with people from all around the world; almost none of my business has been from Illinois because I have not been physically advertising. As a sole proprietor I just accumulated the amount I made (under $5000) each year and added it to my income as self employed and payed to the various powers above me (I have help with my taxes). However, now that I am looking to incorporate I am seeing some difficulties here. I just read in a book that I have to pay taxes to each state I do business in, and in cases register with them. Now I will not even be traveling to these states, this is all being done from my computer in Illinois, if I do go out to do consulting it is only in Illinois. I do not have a target area right now, but I want it to flexible enough to go anywhere in the country.
My questions are (a) what are the legal issues regarding tax if I am to be getting business from other states? And (b) Illinois is an expensive state, would it be advantageous to register in another state because I am not specifically doing business in Illinois?