I’m a California resident but I heard that if I were to create an LLC in Nevada, I can take advantage of the tax laws of Nevada instead of getting dinged by California. Is this true?
If it is not true, is there a work around to avoiding getting hit with all the taxes that California places on businesses?
What are you going to do with your Nevada LLC???
Email me offline and I can give you the name of a reputable CPA in Nevada that will be able to help you or answer your questions.
I set up Nevada corps, but primarily for asset protection. If you are incorporated in California you are subject to their laws. It is possible however to set up a Nevada Corp, as well as a Nevada tax corp, depending on what you are doing. If you would like, I can get you more info.
I have not incorporated anywhere. Just trying to find out where is the best state for me to do so. If anyone is a California resident but got incoporated in Nevada and would like to share information as to the benefits and experiences of having done so, please let me know. I would like to have the best tax and liability benefits as possible. I will be conducting most of my business here in California so I would to avoid as many of California taxes as possible for conducting business here.
One strategy I heard was to create a Nevada LLC with a Nevada C-Corp as a member but buy properties in California as a sole proprietor. Then Quitclaim the deeds to any investment properties to my Nevada LLC. This will allow me to avoid getting taxed in California as a sole proprietor while getting the tax benefits of Nevada sine my Nevada LLC will hold the property. If anyone has heard about such a strategy and exactl how this would work, I sure would like to know. Thanks.
uh, the key here is who is the ultimate owner and how is the LLC being taxed.
If you choose corporate taxation for the LLC, who owns it doesn’t matter. the LLC pays corporate tax rates.
If you choose partnership, or disregarded taxation for the LLC, AND the C-corp is the only member, it doesn’t matter. the C-corp will pay at corporate tax rates.
If you choose partnership, or disregarded taxation for the LLC, AND
YOU are the only member, you will pay individual taxes plus self employment tax.
If you choose S-corp for the LLC, the C-corp cannot be a member.
If you choose S-corp for the LLC and you are the only member, you will pay personal income, but may avoid some self employment taxes if you take a reasonable salary from the LLC.
Nothing will prevent you from paying CA taxes on CA property. Nothing. Any business done in CA is taxable in CA irrespective of where the entity is domiciled.
The only real questions are 1) personal or corporate tax rate and 2) avoiding self employment taxes.
I live in Fl and have my corp set up in NV. How you want to do it is, set up 2 corps both LLC taxed as a C-Corp.
You have a holding company to buy sell and hold. All properties get QCD to it after you buy.
The you have a mgmt company which manages properties and you can use this company for your expenses (car payments, cellphone, internet, ins,travel expenses, etc)
When you sell a house in your Holding Co, you will have a profit (hopefully). You will then have your mgmt co bill your holding company a mgmt fee equal to the profit.
The holding co pays no taxes since it made no money.
The mgmt co can do 2 things. It can pay you as an employee and you pay regular taxes on the income to yourself (state taxes included since your in CA) or just let the mgmt co pay taxes based on a LLC rate which is 15% I believe. Keep in mind your income in the mgmt co is for services rendered , not capital gains on sales of real estate. You also will have deductions so the money it earns will be less. You can also create a SEP IRA for some additional saving and have your mgmt company fund it from its profits.
I live in FL, no state tax so I pay myself whatever the mgmt co has made after my personal expenses and pay no tax in either corp. Instead I just pay regular income tax. This reduces the typical tax bill by about 80%.
Things to know about NV. Its the only state does not share information with the IRS for income purpose. You can name your officers John Smith if you want. Your name only appears on 1 document and its for your resident agent to create the company. When someone checks out your company name, they will not know you own the company if you do not put your name on it. Because the IRS has such limited information on the corp, this allows for greater tax benefits to you. If you do not pay yourself a personal income, you wont pay state taxes in CA on the real estate i believe…
My CPA in Fl does these corp set up. He actually speaks nationally about them and charged $1010 per corp to set up and of course does the taxes for them. I think its $160 per corp. Keep in mind, the price is high, but competive to many. He knows the system and uses it himself for over 5yrs. If you like his number, let me know. His email is CertifiedTaxExperts@msn.com
just tell him your interested in his NV corporation. he even sells CDs he made talking about them and books on the subject. it provides strong asset protection as well.
His name is William Tyler…
I recommend you contact him, its a free call or email…
Andrew
I realize that if I buy and sell properties in California, I will have to pay any taxes for such a transaction.
I would like to learn about which would be more of a tax benefit for me regarding incorporating in Nevada or California and why?
I do not live in Calf but you can live there and set the co up in NV and still buy in any state using them. The difference to my knowledge will come when you sell and how you plan on paying yourself. If you pay yourself, you will still have to pay state tax on your income. But it will all be regular income, not captial gains. The main thing your doing is avoiding capital gains income. It works in any state and you can invest in any state. Of course if you pay yourself a salary from the mgmt co you will need to pay all income taxes required by Cailf since you live there. But you can invest in any state.
but what would be the advantage of setting up an LLC in Nevada versus in California?
Taxes…saving on taxes…ammonitiy…asset protection
http://sos.state.nv.us/comm_rec/whyinc.htm
this is NV home page…
So will there be any “foreign” company charges enforced by California if I decide to incoporate in Nevada but conduct business in CA?
Not sure…a CPA would know.
If you earn money on CA soil, you will pay taxes in CA and will most likely have to register as a “Foreign Entity”
Florida does not require it. Your business is set up in NV and can buy and sell in any state. I do not know what CA requires if any with how the corp gets set up, i could not tell you.
But remember part of the advantages to NV corp is the non sharing rights with the IRS and that your listed as a member, not an owner of the corp if set up right.
yrush2000,
you are correct about the reciprocity with the IRS, if you understand how NV works, you will understand that it is hard to share information about the shareholders if they don’t collect any. That is why there is no reciprocity, they dont have any info to share!
The draw back is that with an S-corp or LLC, you must disclose the members or shareholders.
Remember, it is not a benefit to be a “member” vs. a shareholder. It is all semantics. Frankly, they are one in the same, in my opinion.
With a C-corp or S-corp, the owners are called shareholders.
With an LLC, the owners are called members.
Both of these can be Identified and can be attacked by “frivalous” lawsuits.
It is my understanding that The real benefit to NV comes from anonimimity of shareholders by utilizing The “Bearer” share stock certificate, or if you want, NV does not require you to issue share certificates at all. This can be utilized when you combine it with a C-corp. In NV, unless I am wrong, the S-corp and LLC must disclose its members, thus negating any privacy.
many savy business owners who wish to remain anonymous have elected to have a Nominee director and officer For the C-corp and they do not issue any stock shares at all. This is for privacy only. It depends on what the objectives of your corporation are. A competent actuary like a CPA or Tax Attorney may advise you that the S-corp or LLC may be the way to go. You must seek these actuaries and structure what is best for you.
good luck!
mine are set up to be taxed as C-Corps.
shareholders and members have one very important difference.
corporate stock is considered an investment. as such it is available to satisfy personal judgement creditors. So when you rear-end someone in a pinto, they sue you and win, they can be awarded your investments. now they own the stock & the company that owns the property. you own nothing.
LLC membership is considered personal property by statute. as such it is NOT available to satisfy judgment creditors. at best they get a charging order, which you can frustrate.
both corporations and LLCs protect the members from liabilities arising within the company. Only the LLC protects the company from your personal liabilities.
Note that this has NOTHING to do with how the LLC is taxed. An LLC taxed as a C-corp is still an LLC in law, but is considered a C-corp by IRS.
Wagner…your a CPA…so whats your views on NV corp for investing…
I’ll probably be crucified for this post. whatever. If that’s what someone wants to do, save your breath: I don’t care.
If you live in a high income tax state (CA) you can save taxes with a properly structured and operated NV entity. but realize, you are trading some hassle for that savings. Some people don’t want the hassle, some don’t mind. For me, the pain in the ass factor would outweigh the few hundred bucks a year. If it was more money, I might change my mind.
In my opinion, privacy aspects of NV entities are overrated and in practice difficult to achieve in the real world. Too much information is shared between companies anymore.
No one should own property in their own name. In a low-tax state (TX) it’s just easier, cheaper to operate in a domestic entity and just take care of your business thoughtfully and professionally (written contracts, good maintenance, don’t do stupid stuff…stuff that will get you sued). For most folks, especially novice investors, this is simply the best choice.
Are you saying to form an LLC in NV or TX?