Why A Nevada Corporation

Today TaxMama hears from Meher in California, who is perplexed. “Why would an individual or an entity living and doing Business in California file a Nevada Corporation? There are so many companies who advertise this concept, claiming tax savings and various benefits for the Corporation who files a Nevada Corporation.”

TaxMama answers Tax Questions

Dear Meher,

There are milions of good reasons to file a Nevada Corporation.

The main reason? The incorporators pushing this concept make a fortune. Not just in the first year, when the initial filing is done. But each of those out of state folks who set up Nevada corporations need a Nevada agent of service. The incorporators charge about $100 per year for this service. All they do for the average Nevada corporation for this $100 is to forward the annual forms from the Nevada Secretary of State.

Now think about this, the if the incorporator only snags 100 new Nevada corps a month, they have 1200 corps a year. The renewals of the agent of service in the following year are worth a mere $120,000. Repeat this process for 5 years – you have 6,000 corporations renewing – which is worth $600,000 a year – and all they have to do is forward one letter. After 10 years, just the renewals alone are worth over a million dollars. (In fact, those companies who advertise aggressively and hold seminars regularly, sign up hundreds of new people each month.)

Isn’t that enough of a reason for you? Oh, what’s in it for the corporation? Not a heck of a lot.

They still have to register in their own state, where they are physically located and doing business. They do not escape the local state taxes. They just have extra fees to back up the charade that they are not in California, or wherever. Waste of time and money.

There ARE two reasons for someone to register in Nevada or certain other tax-free states.

1) Anonymity. In theory, Nevada won’t reveal the names of the owners. This is wasted when you have to also register in your own state – which doesn’t provide anonymity.

2) Charging orders. This is an asset protection issue. And there are certain protections from that are offered in Nevada and certain other states that are may not be available in your state. Do some reading (see live links in Resource Box below):
http://en.wikipedia.org/wiki/Charging_order http://www.nvinc.com/nservice6.htm
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1138297

I hope this clears things up for you.

And remember, you can find answers to all kinds of questions about stupid tax tricks and other tax issues, free. Where? Where else? At TaxMama.com

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