Incorporating in Nevada even if you do not live here. If you do not live in Nevada and you have a business that is paying high taxes in your home state, you can incorporate in Nevada and avoid your home state taxes. This is perfectly legal. The book mentioned on our home page, "The Secret Millionaire" discusses using your Nevada corporation in your home state. You can use your Nevada corporation any where in the world. However, if your business is in California (we will use California as an example, however it can be any where in the world), and you are actually doing business in California, you will need to be in compliance with California laws (example, have a city business license, tax permit, proof of business formation like a sole proprietor, corporation, LLCs, etc.). If you have a California corporation, you can keep your California corporation and form a Nevada corporation. Remember, the Nevada corporation is extremely flexible which makes it very attractive to form.
Do you have to qualify your Nevada corporation in California (or your home state)? Yes. If your California business has not been set up as a sole proprietor, corporation, LLC or partnership, etc. If you were to just form a Nevada entity and do business in California under that Nevada entity, you would have to qualify your Nevada corporation or LLC with the California authorities. The disadvantage to qualifying your Nevada entity in California is that your Nevada entity will now be subject to California's reporting, tax and fees. However you can use creative strategies to keep your Nevada entity from having to qualify in your home state.
Usually the authorities would prove that you are "transacting business" in your home state as a foreign corporation in order for your corporation to be subject to your home state's taxes, laws, etc.
NO. For example, in California, your Nevada corporation conducts the business activities listed below, it would be considered exempt from qualifying as a foreign corporation in California:
- Your Nevada entity can be involved in a loan-associated activity, but have no office in California.
- Your Nevada entity can have a California bank account.
- Your Nevada entity can own or buy property in California.
- Your California entity is a subsidiary of your Nevada corporation.
- Your Nevada entity uses independent contractors for its California business.
One creative strategy: If you form a sole proprietorship (usually the easiest and cheapest form of a business entity) or a corporation, LLC, partnership, etc. in your home state AND form a Nevada corporation, they can work together. Your Nevada corporation will legally be doing business in Nevada and your California business will be legally doing business in California. The advantages of a corporation are listed below. If your California business needed money for research, consulting fees, to buy property, to enter into a lease, etc., it could borrow the money from the Nevada corporation to do so. Just like any other loan, the loan would be secured with collateral from your California entity and would make payments to the Nevada corporation for the loan. The board of directors of your Nevada corporation determine the interest rate and other provisions of the loan to the California entity. (Nevada has no usury laws -- the interest rate can be 20% if you want it to be.) If your California corporation makes no money, it owes no taxes. It's okay for your Nevada entity to make money because in Nevada, there are no corporate income tax, no personal income tax, no franchise tax, no tax on corporate shares).
Over 90% of the lawsuits in the entire world are in the United States. A medium-sized business is typically involved in a lawsuit per year here and larger corporations are compelled to maintain teams of full-time attorneys to defend themselves. At the other end of the scale, an individual proprietor risks everything to engage in business without a corporate structure and even individuals who are not involved in business are at risk if they have any assets attached to their names. Meanwhile, the law schools keep churning out more attorneys at an increasing rate.
What’s the solution? KEEP A LOW PROFILE. In business and in our personal lives, too, ideally it would be best to never show up at all on “radar”. It is always better to represent a minimal target profile for the “takers” and the best way to accomplish this feat is very often through the use of a Nevada corporate shelter.
In some cases it may be possible to shelter assets and income in a single corporation but when success is achieved and that first corporation starts to take on a higher and more vulnerable profile, it’s time for some creative thinking. The first step should always be to separate assets from potential liability, so if you have an operating business it is good to ensure that it holds no assets of its own.
Often the best solution is to have the operating entity lease its equipment from another, unrelated (by ownership) corporation. The next step could be to consider spinning off the existing business’ departments into separate corporations: the marketing department could become a separate marketing company, as an example. Almost all businesses must purchase some goods from outside sources, so why not deal with a friendly supply company, one over which you may exert some control from behind the scenes?
Not only will this approach severely limit the prospects for damage by prospective litigants, it will also, by and large, keep the IRS out of your affairs. Audit rates for the 2000 tax year continue to show (not surprisingly) that the smallest corporations have by far the lowest audit profiles. A corporation with less than $250,000 in assets had an audit rate of just .28% last year, while the rate for a corporation with $1 million in assets was more than TEN TIMES as high at 2.90% and the rate for the largest corporations skyrockets to more than ten times that figure at 30.51%.
The key to making this work is to treat each corporation as its own separate interest and to ensure that each entity always acts out of its own self interest. In so doing you ensure that each corporation has minimal exposure to lawsuits and IRS audits and the aggregate exposure is far, far less than it would be with a single, high-profile corporation.
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Silver Shield Services, Inc.
3315 Hwy 50
Silver Springs, Nevada 89429
(775) 577-4822 - Telephone
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