Nevada is often thought of as one of the most business-friendly states in the country. Its tax laws and lack of regulations make it an attractive place for prospective entrepreneurs or business owners looking to expand.
However, taking advantage of Nevada's business-friendly nature is not as simple as just opening an office in the state and reaping the tax breaks. You'll have to navigate complex corporate laws across multiple states to avoid paying taxes in another state or even committing a crime. This is especially crucial if your business is in a city like Reno, close to the border with another state. Here are some of the benefits of incorporating in Nevada, as well as pitfalls to avoid.
Why is Nevada Considered Business-Friendly?
Nevada's laws are designed to encourage commerce in ways that include:
- No individual income tax
- No corporate income tax
- No franchise tax
- Limited reporting and disclosure requirements
- Shareholder information is not public record
- Directors can change corporate bylaws
- No minimum capital is required to form a corporation in Nevada
How Can I Access the Benefits of Incorporating in Nevada?
To gain the perks of doing business in Nevada, you must meet these conditions:
- You live in Nevada
- Your business is headquartered in Nevada
- You and your employees work in Nevada
- Your business owns real estate in Nevada
- If your company is publicly traded, the majority of your shareholders live in Nevada
If I do Business in Multiple States, Whose Laws am I Subject To?
Simply put, you pay taxes where you earn income. If some of your income comes from California, for example, it will be taxed under California law. The California Franchise Tax Board (CFTB) is stringent when determining if a company is considered to have done business in the state. If you engage in any financial transaction there, you'll pay taxes on it.
That's not all. If the CFTB determines that you do business in California, the state will consider you a pseudo-foreign corporation, and you must meet numerous qualifications to continue to do business there. Those include paying a franchise tax, applying for a business license, and disclosing your company's officers and investors. That lack of privacy can keep many Nevada corporations out of California.
Other hurdles are also essential to watch out for. If you incorporate in Nevada, do business in California, and don't meet the CFTB requirements, you may be subject to fines. You may also be barred from suing to enforce contracts or collect money you're owed.
Schedule Your Reno Business Law Consultation Today
Raymond E. Areshenko is an experienced business attorney who's worked extensively in Nevada and California. He is intimately familiar with the corporate laws of both states and can help you navigate the thicket of regulations that can be daunting for an entrepreneur. He can help you decide if incorporating in Nevada is the right move for your future.
Mr. Areshenko serves Reno and Sparks, Nevada, as well as Sacramento and Newport Beach, California. Call (775) 300-7594 today to set up a consultation.