For more information
scroll down to the bottom or click here! |
Strategies
That Don’t Work
with Nevada Corporations
and Common Mistakes
When forming an entity in
Nevada, whether it is a Corporation, Limited Liability Company or Limited
Partnership it is critical that it is formed properly. Failure
to do so may cause legal and tax challenges.
The business of forming
Nevada corporations has skyrocketed over the last couple of years.
Many people around the country are saving money in state taxes by incorporating
in Nevada. States like California do not like losing
state tax revenue to Nevada. They especially don't
like it when people still live in California and operate their business
there, while running all their profits through a Nevada bank account
and don’t pay California taxes.
In any area, there is always
misinformation that exists. For many years we thought the
world was flat until there was some investigation to discover that was
not true! That is also true in the business of forming Nevada
corporations. The increase of companies forming Nevada corporations
without doing their proper homework is taking many people down the path
of uncertainly at best, and illegal activities at worst. We estimate
that 70% of the people who incorporate in Nevada are NOT going to be
able to take advantage of the tax benefits that Nevada offers. It is
becoming economically profitable by other states to review their procedures
to make sure their tax is being collected. You will begin
to find people, who thought they were getting away with tax savings,
start to be audited for things they have done improperly over the last
few years. In other words, just because you haven't been audited
by the state taxing authorities does not mean you have structured your
business properly. Remember, we rarely get audited for something
we did last year; usually it was for something we did 2-3 years ago.
And when states like California start auditing you and looking to collect
penalties and interest for the previous 3 years because you should have
registered to do business in California, you will be sorry!
Here are the most common
mistakes people make when incorporating in Nevada, or strategies that
don't work:
1. Relying on Bearer Shares
2. Not having the corporation
have an employee.
3. Relying on privacy
as your primary asset protection strategy
4. Having an independent
contractor take fringe benefits to which employees only are entitled.
5. Not having substance
by being based in Nevada
6. Not issuing stock
7. Thinking a Nevada corporation
is an asset protection tool
8. Having a Nevada corporation
without a business license
Again, it is critical
to set up things properly. When it comes to tax and asset protection
planning strategies, they do change. As you know, there were many
tax changes in 1997.
You need to be aware of both new tax changes and new case law with regard
to asset protection that may effect your situation. If you
have any questions about this article call Nevada Corporate Planners,
Inc. at (888) 627-7007. At NCP, Inc. it is our job to research these
things and let you know how they may effect your situation.
Bearer
Shares-
Fact or Fiction?
First, it is necessary to
understand the importance of Bearer Shares and why they are a primary
strategy for many Resident Agents in Nevada. Bearer Shares are supposedly
a way of holding stock privately, and a way to have some tax advantages.
Normally, when you fill
out the back of a stock certificate, you must print the name or the
company name of who owns that stock. Then you must record in the stock
ledger the shareholder, address, date, number of shares, and if it was
an original issue or a transfer. Obviously whoever stock is issued is
the owner of the corporation. If is it to the Bearer, then whoever holds
onto that certificate, at a particular moment, will thereby be considered
the owner of the corporation. Others say you can simply hand off the
certificate to a friend before you go into court and "legally"
say you are not the owner (we will address later why that won’t
hold up). Well, if you issued stock to yourself and had to record your
name in this ledger, you would have very little privacy. Keep in mind,
in Nevada this information is not listed in state records, so it is
much more difficult in general to find out who the stockholder is in
Nevada than any other state. Also, a Resident Agent is only obligated
to hold a copy of the stock ledger statement at their office, which
tells where the actual stock ledger is kept which can be anywhere in
the world. This is why it can be so frustrating for attorneys to get
to first base and discover the owner of the corporation.
The first advantage of Bearer
Shares centers around the ability to deny your involvement with a corporation.
Imagine receiving a subpeona to appear in court. You just got sued personally,
and the plaintiff thinks you own a $3 million company. You go into court
and hand the Bearer Shares to the bailiff. You get on the stand and
under oath say, "I don’t own the stock of this corporation."
If they ask who does, you say, "I don’t know." Well,
the lawsuit stops. They thought you owned this $3 million company, and
you now told them you don’t. You have no other assets personally.
In the real world the lawsuit probably wouldn’t stop just like
that. Also, in the real world if an attorney has to spend a lot of money
to get to first base she/he will require a big retainer depending upon
the nature of your case. The big retainer will eliminate 50% of the
frivolous lawsuits anyway. Nevada will give you this benefit without
Bearer Shares.
The second advantage is
centered on taxes. When you have more than one corporation because you
want to have more than one tax bracket at the $50,000 level you must
not be considered a controlled group. (For the specifics on controlled
groups, please see the section on controlled groups). Basically, if
you have one corporation and you own 80% or more of that stock then
you form a second one and you again own 80% or more of that stock, that
will be considered a controlled group. So, instead of getting two separate
tax brackets you will get one. Basically, you will pay more in taxes.
For example, if you had
a company that was going to earn $200,000 in profits this year, some
companies would have you form an LLC and four C corporations to be the
members. Then $50,000 would flow from the LLC into each C corporation
where each would pay 15% Federal Tax. That would be fine if you are
not a controlled group.
People have used Bearer
shares and given them to friends to avoid the controlled group rules.
To make sure your friends don’t take off with a part of your company
you can have them sign the back of the certificate and give them back
to you to keep in a safe place, so they can technically never claim
ownership. It is kind of like playing hot potato with someone. You never
quite have it for very long. In this above example if you were considered
a controlled group instead of paying about $30,000 in federal taxes,
which is 15% on $200,000, you would be paying around $61,000 (which
is $200,000 in one corporate tax income tax bracket)! That is a $31,000
increase in taxes due! Plus the corporations may be viewed as personal
service corporations which means it would pay an additional 39.6% tax
on that $200,000 in net profits!
Are we saying that Bearer
Shares don’t exist? Not exactly. We are saying they won’t
hold up the way everyone would like them to, and for some Resident Agents
in Nevada, if you took away this one strategy, you would take away 80%
of their strategies!
Now that we have discovered
what Bearer Shares are and what they are suppose to accomplish, lets
examine why they don’t work!
Seven
Reasons Why Bearer Shares Don’t Work!
1. We can’t find
one court case in the history of the Nevada Court system that even
mentions Bearer shares, much less any type of recent court case where
they have held up.
2. We can not find a law
firm in Las Vegas that uses Bearer Shares as an asset protection strategy.
3. It is not listed in
the Secretary of State’s information as a benefit of doing business
in Nevada.
4. If you ask the SOS
about Bearer Shares it will tell you to call the Security Division
that handles securities.
5. When you call the Security
Division, it indicates it has heard of Bearer Shares, but is unaware
of them as a strategy.
6. How do you hold meetings
with Bearer shares (put this as an extra)?
7. If Bearer Shares don’t
work and you lie under oath about not owning stock of a corporation
when you know you do, that is a 3rd Degree Felony!
We want to point out that
Bearer Shares do exist in some offshore countries. And if they were
bullet proof they would be a wonderful strategy.
If anyone can provide facts
to the contrary of what we are presenting we would be more than interested.
Until then, the whole concept seems to be full of holes!
First, we had two separate
attorneys do searches in Nevada State Records on CD-ROM’s and neither
of them could find any mention of Bearer Shares! What a shock! You would
think a "rock solid" strategy promoted by other companies
would have abundant case law.
Second, we had one of those
attorneys call all the major law firms in Las Vegas that specialize
in asset protection and find out which ones utilize Bearer Shares as
a strategy. Only a couple ever heard of it and most importantly, NONE
utilize it as a strategy.
So far we can’t find
any mention of Bearer Shares in state court records, nor can we find
a law firm in Las Vegas that recommends it as a strategy.
Third, the state of Nevada
doesn’t even list it as one of the benefits of doing business in
Nevada. They list everything else!
Fourth, the SOS (702-486-2880)
will tell you to call the Security Division (702-486-2440), because
they know nothing of Bearer Shares.
Fifth, and most critical
is the fact that the Security Division handles everything related to
securities. If you had questions about types of stocks available in
Nevada, or how many shareholders you can have they will have a very
specific answer. But when you ask about Bearer Shares, you will get
someone who has simply heard of them at best. At worst, they will not
have any comment on them at all! NOW, if Nevada’s own Security
Division can’t rule for them, how can any Resident Agent rely on
them as a strategy?
Sixth, can you imagine your
Bearer Shares holders being subpoened into court and asked, "Did
you ever vote at a shareholders meeting or annual meeting?" You
know the answer is obvious, of course they didn’t! Usually, someone
will make up three Bearer Shares and distribute them to three people,
but no one ever operates as a real shareholder. If it doesn’t make
sense to you then don’t expect a judge to believe it either. And
to all those companies that say it can be done so easily just ask them
for some evidence of success in the courtroom, because you won’t
find any!
Seventh, there is a legal
term that is called having beneficial interest in a situation. In other
words, even though you may not own the corporate stock directly, you
may have an indirect control over it. For example, if you issued your
corporate stock to an irrevocable Trust, and you were the trustee, you
would have control of the corporation. Bearer Shares, if they existed,
would do the same thing. You have an indirect control over the corporation.
Basically, with Bearer Shares it is very easy to say you don’t
own them if they are not in your possession. The challenge is you would
still, in most cases, have control over them. When you get on the stand
and are under oath you have to be very careful.
If you are asked if you
have any direct or indirect control and you have Bearer Shares and answer
NO, that is a 3rd degree Felony! How do you like that! (look
up case law for this)
The bottom
line is Bearer Shares do not work in Nevada. Don’t be misled by
other Resident Agents that promote them. The key is to do things properly.
If you want privacy in your stock ownership you can do that, if it is
structured properly.
Special
Report on Employees and Corporations
According to the IRS, almost every Corporation
should have at least ONE employee!
Recently, the IRS has focused
its audit procedures on the issue of independent contractors versus
employee status. In order to avoid payroll withholding and the employer’s
share of withholding taxes, many companies treat as independent contractors
certain individuals performing services for the company. This
is one or two exceptions. Click
here to read about the few exceptions.
On audit, the IRS usually
takes the position that these persons were really employees, not independent
contractors. If the IRS prevails on this issue, the employer is liable
for a 100% penalty equal to the amount of income taxes and social security
taxes that should have been withheld. This amount is a liability not
only to the company, but also of the officers and directors of the company.
The IRS can look to the officers and directors for the entire payment
of this amount. This potentially enormous liability hangs over the head
of every business owner who treat themselves or their workers as independent
contractors to their respective corporations.
Nevada Corporate Planners,
Inc., in its goal to bring you the most current information to help
you down the road of doing things properly, is excited to present this
Special Report. With over 30,000 Nevada corporations formed last year,
there is a growing concern within the industry, whether people are being
presented with accurate information. There is a legal term called form
over substance. You need both form and substance to be a legitimate,
operating business. The form part is easy, that is simply forming the
corporation. The area of substance is where most people, in our opinion,
fail to follow through and use Nevada corporations properly.
In order for your Nevada
Corporation to have proper substance, it should include the following:
1. Up-to-date corporate
records (with all necessary Minutes and Resolutions).
2. A bank account in Nevada.
3. A Nevada office complete
with phone line (in most cases).
4. A business license
in Nevada (in most cases).
5. Properly completed
contracts and employment agreements.
6. Copies of payroll tax
returns.
7. Copies of local phone
bills.
8. At least one employee
of the corporation!
This last characteristic
for corporate substance is the most commonly missed. Many people
are calling themselves an independent contractor to the corporation.
As you read earlier in the IRS Report this is an important distinction
to consider. If you are a true independent contractor, that is
fine. Most are not. Consider this fact:
Most corporate officers,
including Vice-Presidents are considered employees by the IRS!
Question:
Can you be an independent contractor to the corporation and still
be the Vice President? A shareholder? A director?
Answer: No.
Question: How do
I act as an independent contractor and still run the corporation properly?
If you are
not a shareholder, officer or director (including Vice President)
then you can become an independent contractor (if done properly) to
the corporation; provided you have at least one employee! This means
someone needs to be paid as an employee of the corporation. We recommend
a salary paid at least once a month.
Keep in
mind most corporate officers are considered employees!
Question: What
are the steps to properly become an employee of the corporation?
1. Form the corporation
(an obvious one).
2. Obtain a Nevada Business
License (See Our Supplemental Guide for this information).
3. Have an employee contract
for each employee.
4. Pay yourself
as an employee, either monthly or semi-monthly. Pay the necessary
payroll taxes; both on the employer side and the employee side. Nevada
Statues say you must pay each employee twice a month. In
Nevada Revised Statue 608.060 it states the exceptions to semi-monthly
payments. If you have any questions about this or the exceptions call
the Labor Commission in Nevada at 702-486-2650. If you are a one person
corporation, then you can pay yourself quarterly if you wish. The
Labor Board is not concerned about one person corporations.
That’s
it! Four Easy steps and Now you’re doing things right!
Question:
Is there any more privacy between being an employee or an independent
contractor to the corporation?
Answer: Certainly. In general, the independent contractor has
less information to give than that of an employee of a corporation.
An independent contractor will receive a 1099 at the end of the year
from the corporation (this does have your SSN# attached to
it!).
An employee of the corporation will receive a W-2 at the end of the
year (again this will have your SSN on it).
Question: Is it
possible to have an employee of the corporation who is not a corporate
officer?
Answer: Yes!
Question: How does
the IRS know if Nevada corporations do not have employee(s)?
Answer: They match up Form 940 and 941(Employer’s Quarterly
and Annual Unemployment Tax Return). If they show no record of these
returns being filed by the employer (i.e. the corporation) this draws
a serious red flag, indicating the corporation has no employees! It
may take them some time to audit everyone, but we strongly recommend
not playing the odds. If your current corporation is not doing things
properly, now is the time to start making some changes.
So . . .
1. If you are the
Vice President and you do not want to be an employee, resign and become
an independent contractor or appoint someone else to be the VP and
pay them each month.
2. If you are the officer
and would like to continue to be, start paying yourself
as an employee.
Relying
on Privacy as your Primary
Asset Protection Strategy
When it comes to protecting
your hard earned assets you want every advantage possible. An ideal
situation would be where you were sued both personally and as a business
and you had to lay your whole asset protection plan out in front of
the judge and have the judge rule in your favor that everything was
structured properly for business reasons! And of course your assets
were all protected! That would be ideal!
Now, if it
takes longer for someone to get to first base in your situation to figure
out who the owners are, wonderful! That just means the plaintiff will
have to spend more money! After all, aren’t most lawsuits a simple
game of economics. And if you can make it very expensive for the plaintiff
to find your assets so much the better!
So what
is the challenge….
The challenge is that many
companies rely solely on the privacy of your situation with Bearer shares
(which don’t work) and nominees (which do work to a certain degree)
to protect your assets. And the whole plan is designed upon the fact
that no one will discover your assets to start a lawsuit. And the rest
of the plan is all full of holes! There is no substance to the corporation
or LLC! No employees anywhere! No business license. If you took away
the privacy of those plans, you would have a plan that was like Swiss
cheese, all full of holes! The only way you would be protected would
be to hide under a rock because you had to be so private!
Again, if you structure
a rock solid asset protection plan and have privacy along with it, that
is the icing on the cake!
The common places most people
have to give up their identity as being linked to a corporation are
in the following areas:
1. Issuing stock
2. Obtaining a Nevada
Business License
3. Opening a Nevada bank
account
4. Being an employee or
independent contractor to the corporation
5. Entering into other
contracts or agreements
6. Loan applications from
banks
You must realize you may be private on the surface level of the corporation
like in the state records, but eventually your name will show up in
one of these 6 areas. So don’t be mislead that you are going
to be so private and no one will locate you.
If you don’t like that option, simply don’t be any part of
the corporation, including being the signer on the bank account and/or
independent contractor.
Having
an Independent Contractor
Taking Fringe Benefits or Meals, Travel and Entertainment Deductions
This is one of the biggest
and most common mistakes everyone makes. People are trying to avoid
payroll taxes, so they structure a situation (or so they think) that
they will be paid as an independent contractor to the corporation. There
is no problem in being an independent contractor to the corporation.
The problem lies in these areas:
1. When there are no employees
of the corporation
2. When they are taking
fringe benefits or meals, travel and entertainment deductions as if
they were an employee.
First off, there must be
at least one employee of each corporation. The IRS doesn’t understand
how it is possible to operate a corporation solely with independent
contractors and not have at least one employee. If this is a one person
corporation then you would be the employee!
Second, if you were an independent
contractor to your corporation, and someone else must have been the
employee, then you would not be entitled to fringe benefits! Those are
only reserved for the employees!
Fringe benefits include
things like being able to take expenses for meals, entertainment and
travel. Fringe benefits also include things like: no-additional cost
services, qualified employee discounts, working conditions, fringe benefits,
de minimis fringe benefits (use of copy machine for personal use), and
qualified moving expense reimbursements. These are all excluded from
employee’s gross income.
Independent contractors
would not get these benefits and would have to pay for them out of their
own pocket!
Many people are going to
find out the hard way when they get audited by the IRS after they have
been a one person corporation taking pay as an independent contractor
and not having any employees anywhere! The IRS on several occasions
have gone back and deemed all that income subject to FICA and FUTA and
penalties and interest! And usually it is a 100% penalty!
From 1988 to1994, the IRS
conducted 11,400 audits of firms forcing the reclassification of nearly
500,000 persons as employees rather than independent contractors, producing
an additional $751 million in payroll taxes and penalties. Studies
show that IRS rulings support "employee" status 90 percent
of the time. The IRS is no respecter of size. Audits range from IBM,
right down to the "mom and pop" enterprises.
Also, keep in mind the IRS
has strict guidelines for what qualifies someone to be viewed as an
independent contractor. The essential test is whether management has
the right to supervise and control the manner and means of work done
by an individual. If the worker clearly controls his or her work methods,
works for multiply employers, sets his or her own hours, is liable to
suffer or make a profit and provides for his or her own equipment the
IRS will usually concede this person is an independent contractor.
Not Having
Substance of
Being Based out of Nevada!
General Rule # 1:*
In order to properly form a base in Nevada to serve your
customers, the following requirements should be met. They include having
the following:
1. A Nevada corporation
2. A Nevada bank account
3. A Nevada physical and
mailing address
4. A Nevada phone number
5. A Nevada business license
(if required)
6. A Nevada office
7. An employee
to the corporation [both the corporation and individual must pay the
proper payroll taxes (in general this is true for all corporations).]
This is the one that every seems to miss. If you do the work from
your home office in your home state, then you have created nexus in
your home state. Then it makes no sense to create nexus in Nevada
also. The exception to this would be if someone owned a restaurant
in California and Nevada and had to allocate revenue to both states.
They may have an incentive to establish additional nexus in Nevada.
*NCP, Inc. offers a Las
Vegas Office and bank account that can accomplish 1-6 for you, and
refer you to a company to help you with your payroll!
Step 1:
Now, you have a presence in Nevada for your new marketing company. If
you look at it from a logical point of view, would you do business with
a company out of Nevada that did not have all these things? Absolutely
not!
Note: "Substance
over Form". Form refers to the first part of this equation.
This is met when you form the corporation or LLC (This is what we can
do for you at NCP, Inc.). Your new business should also have
the proper substance so it can stand up to any incident of questioning
of its existence. Forming the corporation or LLC alone would not stand
up against scrutiny by a judge or a state tax examiner. You need to
add substance to the equation. Substance is everything we put in
place to establish your presence in Nevada as in Situation #1. Do
you see how having the proper business presence in Nevada provides substance?
Without substance the corporation may be ruled a sham! In other
words, if you are considering using a Nevada corporation or LLC, and
you do not operate it with proper substance, serious challenges may
soon follow!
Issuing
Corporate Stock
In Nevada,
stock can be issued in consideration of cash, property or services.
In many states you can not issue stock in exchange for services. Nevada
also has an advantage, because they have "Thin Capital Rules,"
which basically means you can issue stock for as low as $100, whereas
many states have minimal capital requirements. This can come into play
in other states when someone is trying to pierce the corporate veil
and claim the corporation was undercapitalized.
There are no time constraints for issuing stock in Nevada. Do not
be misled to believe this means a corporation does not have to issue
stock! That could be a big mistake! Keep in mind, stock issuance
can come into play if someone is trying to sue the corporation, pierce
the corporate veil or if the IRS is auditing the corporation. In these
instances, it is critical to have complete corporate records in place.
We strongly recommend doing it right from the start, so if any of these
situations arise the corporation is ready to stand up to any of type
of scrutiny. Take the logical perspective. If an exchange of assets
does not take place, then the corporation itself has no assets or owners.
If the corporation has no assets or owners, it cannot do anything and
becomes a useless entity. Do you want to risk a judge ruling that because
the corporation did not act like one, there is no liability protection
and you are held personally liable for all the corporate acts? I hope
not!
Thinking
a Nevada Corporation is a Primary
Asset Protection Tool To Protect All your Assets
What is the
main function of corporations in asset protection and what are their
limitations? The main function of a corporation, whether it is in Nevada
or anywhere else, is its ability to insulate personal assets against
liability.
Basically, when you get
sued as a corporation operating your business, your personal assets
are separate and can be protected. The challenge is that a corporation
is not always an ideal vehicle to protect your personal assets.
There are two major drawbacks
of the corporation as an asset protector:
1. The transfer of assets
to and from the corporation may carry tax implications. Yes, you can
transfer assets into the corporation tax free under IRC 351, but you
must take back 80% of the stock. In other words, you are trading one
asset for another and are really no better off than when you started.
2. Creditors of a stockholder
can claim the shares you own or any obligations due you from the corporation.
The corporation actually has marginal use in wealth protection. Did
you ever consider this happening to you? If you get sued personally
and own 100% of your corporate stock you lose your entire company!
Even if you own a small percentage of stock or have loaned money to
a corporation you can lose that by a personal lawsuit or creditor
going after you! How are most of us most likely to get sued personally?
What is the one thing just about all of us do? We drive cars! Did
you know the one thing that insurance companies will not cover
in an automobile accident that could cause you to lose all your
assets personally? Do you know the tools that can prevent that
from happening and it is not a Nevada Corporation? Call our offices
at (888) 627-7007 for these answers and more! Keep in mind the corporation
is a key component of your overall asset protection plan, but keep
in mind it does have limitations.
Do Nevada Corporations have
any special advantages in forming a corporation as opposed to forming
one in your home state when it comes to asset protection? Yes and no.
Nevada is the most difficult state to pierce the corporate veil, which
is a major reason most major companies incorporate in Nevada first even
though they may have to register to do business in your home state.
When it comes to pure asset protection the answer is no! Yes, Nevada
is much harder to get to first base and trying to determine who the
stockholders are, and that may be a benefit in a frivolous lawsuit,
but when it comes to a serious big time lawsuit, it will be not much
different. Please read the section of why Bearer Shares don’t work
either.
Unfortunately,
many companies in Nevada that promote Nevada corporations promote them
as a magical asset protection device that will save you from any situation,
even a situation where there is fraudulent conveyance! That is simple
not true. There are different tools to accomplish different things.
Be cautious of companies that primarily promote just Nevada corporations,
because it is not the cure-all that they make them out to be.
Having
a Nevada Corporation
Without a Business License
Are Nevada Corporations
required to have a business license in the state of Nevada? In most
cases Yes! It depends upon the corporation’s activity.
For example, if a corporation
is going to be a shelved or inactive, (meaning it will do no business
and just sit on the "shelf") then No business license is required.
Nearly all other situations do require a business license, according
to the Nevada business license division.
Today, 80-90% of all Nevada
corporations, especially those not doing any business in the state of
Nevada do not carry business licenses. That spells trouble! If your
goal is to form a Nevada based corporation and realize not only the
tremendous tax advantages, but also to protect your assets, the area
of business licenses needs to be handled properly! Think of it this
way, how many businesses do you interact with on a weekly basis?
Of those, how many have
a business license? Let’s see, there is the grocery store, dry
cleaner, local restaurant, gas station, realty office . . . just about
all of these carry a business license. Again, the point is to do it
right. The common response is . . . I do not have any mployees working
in the state of Nevada, therefore I do not need a business license in
Nevada. That affects the amount of employee tax due, however a business
license is still required.
Let’s assume
you live in California and you want to start a Nevada Corporation to
act as a trading company. You will be the only employee working for
this corporation and you intend to set up a profit sharing plan as well.
What are the licensing requirements in Nevada?
There are actually
4 Steps involved (i.e. four offices to contact). Since
our office is located in Clark County (not the city of Las Vegas) a
business license is only required for Clark County.
1. Department of Taxation.
2. SIIS (State
Industrial Insurance System) or any other private workman’s compensation
carrier.
3. Clark County Business
License Department.
4. ESD (Nevada
Employment Security Division).
1. Department of Taxation:
a. Sale and Use Tax-
This is a 7% tax on all items sold within the state of Nevada.
If you sell books around the country, there is no sales tax due! A
one-page Combined Sales and Use Tax Return is filed monthly
with the Department of Taxation, whereby you report and pay all sales
tax collected. You have until the end of the following month to submit
this return along with any sales tax due.
If the corporation purchases
items outside the state of Nevada, and there is no sales tax applied,
sales tax will be applied as if that item was purchased in Nevada
with sales tax. In other words, the corporation will have to pay sales
tax each month on those items it purchased out of state with no sales
tax.
Nevada Seller’s
Permit (Resale Number)- If your corporation is selling a product
or any tangible items within the state of Nevada, it is a state requirement
for your corporation to obtain a state Seller’s Permit. A state
Seller’s Permit number will allow your corporation to purchase
supplies to be sold by your corporation without having to pay tax
on those items, as long as they are for resale. This number is used
by the state of Nevada to collect its sales tax on items you sell.
These taxes are collected by your corporation and paid to the state
of Nevada.
b. Quarterly Business
Tax- The fees are $25 per employee per quarter working in Nevada.
If you have four employees and only one worked in the state of Nevada,
then the corporation would pay $25 per quarter or a total of $100
per year.
The Department of Taxation has an application fee $25 plus a start-up
fee ranging from $75 - $250 based on the type of business.
2. SIIS (State Industrial
Insurance System).
a. The corporation must
have a workers’ compensation policy with SIIS, or private carrier,
if it has any employees (this includes any part-time
or full-time employees and paid corporate officers). There is no grace
period for obtaining a workers’ compensation policy. You are
subject to the assessment from the moment you hire an employee or
become a corporate officer. If the corporation pays you only in reimbursements
(not considered salary) no SIIS is required, as long as there are
no other employees. If you are an officer of a Nevada corporation
and are paid by an out-of-state corporation, then no SIIS is required,
since you do not receive any paid compensation from the Nevada corporation.
b. What is the
penalty for noncompliance? Failure to obtain coverage constitutes
a misdemeanor and you may be subject to a fine and/or closure of your
operation in Nevada. You may also be liable for any medical and compensation
expenses associated with any claim filed by an injured worker if the
accident occurs within the course and scope of employment. Also,
Nevada Revised Statues 616D.200 was amended requiring SIIS to
collect three times the premium that would have otherwise been owed
to the system during any period an employer has failed to provide
workers’ compensation for his employees. If you have already
been quoted your penalty, this penalty may increase for each day you
continue to remain uninsured.
c. The SIIS fee is based
on the amount of payroll and the nature of the business. For example,
if your total payroll was $1400 per month, the fee would be $9.10.
3. Clark County Business
License.
a. Business license registration
requires the following information:
1. Corporate name, address,
phone number, owner’s name, percentage of ownership, residence
address, SSN, date of birth and type of business.
b. The registration
fee is based upon the type of business and sales of taxable items.
This fee can range between $100-$250 and is paid semi-annually.
c. There is an initial
application fee of $30 as well.
4. Nevada Employment Security Division (ESD).
a. This department collects
unemployment taxes. This tax is paid quarterly (same as Federal unemployment
taxes) by the employer (corporation). The tax rate is 3% of gross
wages up to $18,000 per employee (2.95% is for the unemployment
and .05% is for the claimant employment program). This tax is $540
per quarter per employee if the gross wages are at least $18,000.
There is no fee to register with this department. All they
require is the corporation’s Tax ID number and general corporate
information. A business license is not required to register. Again,
if you are paid as a corporate officer by the corporation, you must
register with this department.
Below we have
listed the addresses and phone numbers of all the necessary departments.
If you have any questions regarding these various departments, please
call and they can mail you the appropriate forms.
| Nevada
Department of Taxation
555 E. Washington
Ave.
Las Vegas, NV
89101
(702) 486-2300
|
| State
Industrial Insurance System (SIIS)
7180 Pollock Drive
Las Vegas, NV
89102
(702) 837-30000
|
| Mailing
Address:
P.O. Box 26929
Las Vegas, NV
89126
(702) 259-5988
|
| Clark
County Business License
500 S. Grand Central
Pkwy. 3rd Floor
Las Vegas, NV
89155
(702) 455-0174
|
| Mailing
Address:
P.O. Box 551810
Las Vegas, NV
89155
(702) 455-4252
(800) 328-4813
|
| Nevada
Employment Security Division (ESD)
1830 E. Sahara
Ste. 202
Las Vegas, NV
89104
(702) 486-8222
|
You will be
pleased to know that our goal is to provide accurate information. If
you notice anything that is inaccurate we would appreciate you letting
us know so we can make the necessary changes. Let us know if there are
other strategies you would like us to do more research on and we can
report our findings. Call Nevada Corporate Planners, Inc. at
(888) 627-7007.
- This research
attempts to answer the question of whether or not a state
can apply its own law regarding piercing an entity to so-called "pseudo-foreign" corporations.
Which State to Incorporate In?