I've got lots of people (media, friends, etc) telling me that I should have a Nevada Corporation and then to also have a S-Corp in California. My accountant is the most conservative accountant I've ever met and sees no need for this. Based on my Computer Consulting business that works with multiple entities around the US, and the last post I did concerning foreclosure, having an actual corporation would have gone a long ways towards protecting me, I believe. Not to mention that Nevada has no state income taxes to speak of.
Do you guys recommend something like this? Nevada LLC & California S-Corp?
What state do you live in (this is VERY important) and what state does most of your income get generated in (this is also VERY important).
If you reside in CA, then CA has every right under the law to tax your full income from all sources worldwide. They generally allow a credit for taxes _paid_ to other states on income EARNED in those other states. This to eliminate (or greatly reduce) the impact of any double taxation.
Given that NV has no state income tax, I'll bet you can guess what the credit amount will be.
Generally you don't save any money. It costs to maintain duplicate corporate registrations in CA and NV.
I agree with Paul. The cost of being incorporated in Nevada includes the necessity of having a local agent. In addition, I recall that Nevada corporations used to be required to publish a summarized balance sheet in a newspaper, all companies, not just locals or public companies, all companies were required to do this. I don't know if this is still the law. When I was doing credit analysis, I found information on companies this way. They always wondered where I found out so much about them.
You will find attorneys that recommend being a Nevada corporation because of the legal loopholes in Nevada. As far as accounting, it should not make a difference.
Thanks for both replies. You guys are just like my accountant! :o) I'm messing with ya! Thanks again for the advice. I guess I thought I'd get different information but knowing that I'm getting the same information that my accountant is giving me is a good thing.
So, would you recommend I do an SCorp in California?
I'm a computer consultant, self employed, and this year I generated a pretty good income. ( I know, what's "pretty good" mean?). I'm afraid to say how much out here as I know this is all public information. Out of the companies I work with, I'd say that at least 1/2 of my income came from outside the state of California, probably more. It's a services business and I'm not reselling (yet) products, so the sales tax issues aren't there yet. I've been thinking about moving into a reseller model, but have definite concerns about the sales tax office of California. I hear it's a painful process.
I also have a land business that isn't doing so hot and if I had put it under a corporation, there may have been more I could do with it, but as it stands, as a sole proprietor, I am personally responsible for any issues, including forclosure issues. I know that having a corporation shouldn't make me act any differently than I would as a sole proprietor. I would still act responsibly concerning my debts. However, I'm wondering if having a corp might not be a benefit to me.
I also have another business, but it's similar to the consulting business where I create a product but don't charge sales tax because the I never give the product to the customer, but deliver it to their customers. I deal with brokers around the nation, although my income comes from a specific company that is in California.
Thanks in advance for ideas about this. My accountant also doesn't seem to hip on me even having a corporation, let alone a Nevada corp.
and there's a reason for that, along with other tax issues I think real estate in a corporation doesn't get the lower capital gains treatment when the property is sold.
You might want to look into a limited liability company, an LLC. It has the liability protection of a corporation, but it is taxed as a partnership, similar to an S corp. It has a lot to recommend it over an S corp. Your accountant should have more details.
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I think you'll find the Nevada corp idea is a waste of time because you'll have to register your corporation and pay taxes in whatever state you do business in. In the old days, a Nevada corp made some sense because it was so easy and inexpensive to incorporate. But now all of the states found a way to make it just as easy to incorporate, and they all expect you to register and pay taxes in their state if you do business there.
And, no one these days is going to give you a mortgage in just the name of a corporation without you also being personally liable for the mortgage. That too, was a trick people used sometimes be able to pull off, but the banks and everyone else got wise to that.
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