Nevada LLC Tax Rate: Everything You Need to Know
The Nevada LLC tax rate is one of the lowest because there is no corporate or individual income tax in the state. 3 min read
2. Nevada State Business Income Tax
Updated July 7, 2020:
The Nevada LLC tax rate is one of the lowest because there is no corporate or individual income tax in the state.
General Information About the Nevada LLC Tax Rate
- While an LLC doing business in Nevada is not subject to individual or corporate income taxes, if the LLC does business outside of the state, the corporation will be subject to taxes in another state.
- To say your LLC is doing business means there is an office in that state, it is earning revenue, and it may have employees.
- To do business in another state, your LLC must first qualify in that state. The LLC will be considered a foreign corporation. Qualifying to do business is similar to incorporating in that state.
- You must register your LLC with the Secretary of State (SOS) and pay filing fees, which could be the same or more as a domestic corporation. A domestic corporation is one formed in that state.
- Failure to register results in the business being subject to monetary penalties as well as being barred from suing anyone in that state. It also means there will be no enforcements to any contracts in that state, which means anyone owing money to the business will not be obligated to pay.
- Under state law, failure to qualify may constitute a crime.
- The amount of tax you'll pay in any state where you do business is dependent upon your level of business activity in that state.
- Rules vary in each state, but there is a franchise tax in some states, which you may have to pay for doing business in that state. Although you won't pay tax in Nevada, you will owe tax in other states where you do business, which means there are no tax savings.
- There are several benefits of doing business in Nevada, one being the state's business-friendly atmosphere.
- Other benefits include the state requirements for reporting and disclosure are minimal; shareholder information is not part of the public record; directors have the authority to change the corporate bylaws; and there is no minimum capital required to form a corporation in Nevada.
- A downside is if shareholders do not reside in Nevada and the bulk of the business is conducted in a state other than Nevada, it's possible you will not be eligible to take advantage of the corporate laws for Nevada.
- Nevada allows a single individual to form a limited liability company, which results in the income from the LLC being included on your individual tax return.
- In Nevada, there are no franchise or inventory income taxes.
Nevada State Business Income Tax
In general, a business is taxed in part based on its legal form. In most states, a corporation is subject to a corporate income tax, and businesses that are considered "pass-through entities" such as LLCs, sole proprietorships, S Corporations, and partnerships are subject to tax on personal income.
Unlike other states where the legal form is important in determining tax, in Nevada whether the business has employees is the issue.
Tax rates vary widely for corporate and personal income among states. Corporate rates range from 4 percent to 9 percent. Personal rates range from 0 percent to 9 percent or more in some states.
Although Nevada is one of four states that do not have a corporate income tax or a personal income tax, this does not mean a Nevada business does not pay any state taxes overall.
If a business has employees and reports gross wages to the Nevada Employment Security Division (ESD), it is subject to the modified business tax (MBT) imposed by the state.
The modified business tax is described by the Nevada Department of Taxation as a quarterly payroll tax. The MBT rate is 1.17 percent. It is assessed if taxable wages exceed $62,500 in a quarter. If the taxable wages are $62,500 or less, no MBT is due.
If you are doing business in multiple states, the business may have "nexus" with those states, which means you may have an obligation to pay taxes in those states.
Because the rules governing the taxation of multi-state businesses, as well as what constitutes nexus with a state or tax purposes, is complicated, it is recommended that a tax professional be consulted.
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