Do advantages for incorporating in Nevada exist? For residents, the answer is yes. For nonresidents, it is probably no. Unfortunately, there are promoters who hype business formation there indiscriminately. Two claimed benefits are secrecy about owner identity, and no personal income tax.

BENEFITS FOR RESIDENTS: Residents of any state are almost always better off with home state incorporation, where they live and do business. Home state laws require corporations formed somewhere else to qualify to do business with the home state. This means a virtual doubling of expense, initial and continuing. The company will have to maintain a registered agent both places and must pay not only the original cost of formation, but the cost of qualification with the home state as well. Annual reports must be filed both places.

NONRESIDENTS-SECRECY: Go to the Nevada Secretary of State Web site. Search for any corporation. The report shows the names and addresses of the officers. With the typical small company, the officers are also the stockholders. So much for secrecy. There are better jurisdictions for those who believe it important to have this kind of corporate "unlisted number", and if this is important to you, contact us.

NONRESIDENTS-TAXATION: If you live within California (as an example), and make your money there, California will expect you to pay California income tax. It would help millions of California residents if they could avoid the state income tax by incorporation across the state line. There are probably California residents who do not declare income on their California state income tax returns arising from the business conducted within California by a Nevada corporation, just as it is likely that there are California residents who don't file state income tax returns at all. Either way, it's a risky undertaking. If you have further questions along these lines, contact us.

You may have heard other reasons. We form Nevada companies all the time, have nothing against the state, but have yet to hear a reason which convinces us that all entrepreneurs are better off forming there rather than their home state.



(c) Copyright 2010 Accounting LLC