Nevada C Corporation Advantages: Everything You Need to Know
There are many Nevada C corporation advantages that companies should be aware of such as privacy, tax benefits, and limited liability.3 min read
2. The Loss of Benefits When a Nevada Corporation Does Business in California
3. Why Does Nevada Corporation Pay Zero in State Income Tax?
There are many Nevada C corporation advantages that companies should be aware of. When you form a corporation in any state, you'll have privacy, tax benefits, and limited liability to a certain degree. When you form a corporation in Nevada, these concepts are taken to a higher level. Entrepreneurs and businesspeople alike can take advantage of these concepts. Those who want privacy, low state tax, and confidentiality should make forming a Nevada corporation a priority. The Nevada judicial and legislative branches of government are generally savvy and corporate-friendly.
Advantages of a Nevada Corporation Over Other States
The laws are based somewhat on the Delaware corporate law, but legislators in Nevada have gone even further when it comes to low taxation and high privacy rights. This is seen through inclusive asset protection and corporate privacy regulations. When a corporation is established in Nevada, it has a guaranteed right to privacy of shareholders. This privacy also extends to any vice presidents or other corporate officers.
Shareholders aren't listed on public record in Nevada, with the exception of the appointed registered agents and directors. All other officer names in Nevada corporations are private and protected under the state law. Nevada corporations may hold their yearly meetings anywhere, which is different from other states. They can be held in another country, over the phone, online, or through other means.
Another area where corporations in Nevada benefit is low taxation. The personal nominal taxation rate at a federal level is 28 percent. This doesn't factor in Medicare or Social Security tax. Those would come to the total federal tax burden that's close to 45 percent for a company that's not incorporated. If you wanted to establish a corporation in Nevada, the first $50,000 of net income gets taxed at 15 percent, which is the nominal corporate rate. This equals a 30 percent difference in income.
Many people choose to incorporate in Nevada because it provides great limited liability and asset protection to officers, directors, and shareholders. According to statue, shareholder liability is only limited to how much was invested in the corporation. No director, officer, or stockholder is personally responsible for any liability or debt of a corporation unless they're also the alter ego of that corporation.
Protection isn't just limited to a statutory level. The courts of Nevada are hesitant to allow the corporate veil to be pierced unless there are extreme cases of fraud or a total disregard for the formalities of a corporation.
The Loss of Benefits When a Nevada Corporation Does Business in California
Many television and radio advertisements talk about the benefits of being incorporated in Nevada. They say it has favorable tax policies and liberal incorporation laws. While the state does have many benefits that companies can use to their advantage, it's important to be aware if you're doing business in California.
While it's not required by California law for a business to incorporate in the home state (or where the company is located), there are disadvantages to incorporating outside of the state when you live in California. This is mainly due to the fact that there's a long-established law in California that lets it apply its rules to any company doing business in the state.
Under the "pseudo-foreign" California corporation laws, when a foreign business (considered a corporation that's established in another state) opens its doors to California, the business must register with the state as a foreign corporation. They need to qualify in order to conduct business in California when they get involved in successive and repeated business transactions there.
If they don't qualify, there will be a ban on using the court system of California and civil penalties. There's also the risk that agreements and contracts that were entered into by foreign corporations in Nevada that aren't qualified might be canceled or rescinded by court order.
Why Does Nevada Corporation Pay Zero in State Income Tax?
Corporations in Nevada don't pay any state income tax. The state doesn't charge the following:
- Capital stock tax
- Corporate income taxes
- Franchise tax
- Stock transfer tax
- Estate tax
Nevada also doesn't tax corporate shares. Since there isn't any state income tax for Nevada, the corporation is only subject to federal taxation.
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