I am looking to set up an LLC outside of my state of residence. Does it matter what state I set up the related business bank accounts in?

yes. As long as your main place of work is your home/office.

Yo are talking apples and oranges. Capital gains are related to your basis not the form of payment. If you are a cash basis taxpayer, you pay taxes when you receive cash beyond your basis. We can help you with structure.

Yes you should be reporting the capital contributions. Under the old Form 5472 rules, it's true that only items that impacted taxable income would be reportable transactions. So, a capital contribution by you to the corporation would not be reportable, unless the equity contribution was somehow below or above a fair value contribution in exchange for services that you might provide for the corporation - essentially an imputed reportable transactions. When the IRS changed the Form 5472 rules to require non-U.S. owned single member LLC's, they expanded the reportable transaction definition to include virtually everything. The term “transaction” is defined in Treas. Regs. Section 1.482-1(i)(7) to include any sale, assignment, lease, license, loan, advance, contribution or other transfer of any interest in or a right to use any property or money, as well as the performance of any services for the benefit of, or on behalf of, another taxpayer. So, for example, contributions and distributions would be considered reportable transactions with respect to such entities. These amounts can be reported on Lines 12 and 25 with an explanatory footnote that clarities the amounts are capital contributions and not amounts that impact taxable income.

I'm assuming you're talking about yourself, working for another company? The first thing to consider is that a "1099" is NOT an employee, rather an "independent contractor". The IRS takes it seriously when a company claims 1099 contractors, when in fact, these contractors are treated as employees (the IRS wants payroll tax and will fine companies that miscategorize). To be a 1099 contractor, rather than an employee (W-2), you must have complete control over your schedule - when you work, how much ect. There are other criteria, but this is the main one - you must clearly not be treated the same as an employee. The other thing to consider is that if you are a 1099 contractor, you are responsible for paying and submitting your own income tax and self employment tax to the state and the IRS. It is more advantageous for a company to pay you as a 1099 contractor as they save paying employer portion of payroll taxes. Also you will not count as an employee for the Affordable Care Act (which impacts companies with over 50 employees). Hope this helps. Kathryn

I have established off-shore development relationships with individuals and firms in India, Ukraine, Belarus, Russia and Korea going back to 1996. You might find it a lot smoother to have them work through an established firm in India that is already set up with all appropriate licenses, tax-reporting, payment systems, and so on. It can be tricky enough to communicate the software requirements and other specifics of your project without you and them also learning and implementing processes to respect domestic and foreign regulations. If you'd like more information, feel free to set up a call.