You may be asking yourself, “Should I form a Nevada Corporation for my California Business?” Nevada corporations and Nevada limited liability companies are often marketed as the superior choice for the discerning business owner. I have nothing against these Nevada business entities– they are every bit as good as their California counterparts. However, they are not a money saver for the owners of California businesses.
California charges a high price for business owners who want to protect themselves from liability. Each year, a California Corporation or LLC must pay an $800 franchise tax, on top of any other income taxes or fees that may apply. Like many other states, Nevada charges less than California for the privilege of forming a Corporation or LLC under its laws.
Because of this, it is commonly thought that the California business owner can save several hundred dollars a year by forming a Nevada business entity. In most cases, nothing could be further from the truth. Like most states, California requires any business that maintains an ongoing presence within the state to “qualify” with the California Secretary of State. Of course, a “foreign” Corporation (i. e., one formed in a state other than California) is required to pay California’s $800 per year franchise tax for the privilege of qualifying. Instead of saving money, the California business owner will actually pay more by incorporating in Nevada: Nevada’s annual franchise tax plus California’s.
There can be valid reasons for a California business to incorporate under the laws of another state. However, saving money is not one of them.
This is just a basic overview and is not legal advice specific to your situation. If you would like to speak with Jonathan about your situation, please email him at email@example.com or call him at 925-217-3255.