Nevada Corporation Tax Reduction

The reduction of your tax liability is not only a smart business practice, but it is your right and duty. Every savvy business person should have a tax reduction strategy in place. Forming a Nevada corporation is a great place to start. The advantages available to Nevada corporations are substantial, and available to you no matter where you actually reside. Learning the advantages, and making them a part of your tax reduction strategy can add up to a substantial savings in your ultimate tax burden.

Corporate Tax Reduction Basics

Let’s start with the basics. Corporations are taxed at a much lower rate than the nominal individual rate, no matter what the income level is. The nominal Federal tax rate for an individual is about 28% for the first $50,000 in earnings. Corporations are only liable for 15% for the first $50,000 in income (and about 22.5% for earnings between $50,000 and $100,000). So if we were talking about an individual who earned $50,0000 in income, that person would be liable for approximately $14,000 in taxes. If a C Corporation earned that same $50,0000 in net income, it would only be liable for $7,500. That is a huge difference. And this is before the corporation utilized any of its legally-available tools to minimize reportable income and maximize its deductions. And we should also consider that the nominal individual rate of 28% does not include other applicable federal taxes like Social Security and Medicare that must be paid by the individual and that can add up to a total federal tax burden of closer to 45%! So the tax advantage of any corporation is readily apparent.

But there are even greater tax savings advantages available if you incorporate in a state that minimizes it’s state taxes. Nevada Corporation offers:

• ZERO Corporate Tax
• ZERO Corporate Shares Tax
• ZERO Stock Transfer Tax
• ZERO Capital Stock Tax
• ZERO Franchise Tax
• ZERO IRS information sharing agreements

Nevada Corporations, in stark contrast to states that charge a substantial corporate income tax, like California for example, are not taxed by the state. And this fact leads to a substantial difference in tax liability between a California corporation and a Nevada Corporation. In California, for example, if a corporation anticipates it will have a tax liability of at least $500, it must estimate the tax and make quarterly payments or be subject to heavy fines. This is simply not the case with Corporation in Nevada. And many other states, California included, have a reciprocal arrangement with the IRS wherein they agree to share relevant corporate, business, and financial information. Again, this is simply not the case with a Nevada Corporation because Nevada has no such agreement.

Strategic Tax Reduction Examples

Because it is reasonable to expect that your corporation needs to acquire business equipment, supplies, and transportation, your Nevada Corporation can purchase, lease, or rent these, and then take the appropriate federal tax deductions. So long as they are purchased for legitimate business needs, it is legal to acquire these through the corporation.

Now for an example: Let’s say your corporation needed a new, expensive lap top computer system for business purposes. The lap top costs $2500. If you were to purchase this lap top as an individual, you would have to pay with your personal “post tax” money, meaning that the $2500 you would shell out for the computer would be closer to an actual $4,500 of your earnings, after the 45% federal tax chunk is taken out. Wow. On the other hand, if you used your Nevada Corporation to make the acquisition from money it earned, and then deducted the acquisition as a business expense, the lap top will have only cost an actual $2,500, saving you $2,000!! And this strategy would hold true for any legitimate business acquisition, such as a vehicle for business transportation purposes, etc.

Another example of successfully utilizing your Nevada corporation for tax reduction could involve legitimate business trips. These trips could include, for example, site inspections of potential office locations, anywhere in the world (think Cancun, the Bahamas, or even Las Vegas, etc.). You and any other officers of the corporation could make this trip, and all necessary room and board accommodations, part of a legitimate business expense that would be deducted. And even “team building” activities during these trips would be potential candidates for expense deductions. So long as more than half of each trip day was spent on actual business (more than 4 hours a day), this could be a completely legitimate tax deduction.

Yet another example where your tax savings could be maximized with a Nevada Corporation would be in the area of retirement planning. While you as an individual are strictly limited to a maximum IRA amount every year (approximately $12,500 if you’re under 50 years old), this is not true for a Corporate Pension Plan. Your corporation could implement a pension plan with significantly higher, tax-free deposit limits, and these deposits can grow in the pension plans (with proper fund management and investment) also tax free! Further, these deposits towards the Pension Plan would be tax deductible for your corporation! This can amount to tens of thousands of dollars being legitimately secured, tax free, in an approved corporate pension plan!

And the examples seem endless! Here is a more extensive, yet plausible manner in which to utilize the excellent Nevada corporate tax treatment to your advantage. Imagine that you live in a high-tax state that just hammers you on “passive” income--that is, income earned via investments, capital gains, etc. Passive income is usually taxed at a much higher rate than “active” income (through the management of your corporation, for example). You can utilize your Corporation in Nevada to manage your investments, and set-up a Nevada Limited Liability Company (LLC) to hold these investments. The LLC can pay the Nevada corporation management fees for this service, and these fees are earned state-tax free in Nevada! So long as these Nevada corporations were properly organized, and all corporate formalities observed, they would be completely separate entities from you and hence all tax liabilities (however minimized) would be incurred directly by the corporations and not by you.

Additionally, your Nevada Corporation could pay you a salary for your services. This would avoid the dreaded “double taxation” that occurs with any sort of dividend distribution, and your corporation would even be able to take a tax deduction on the amount it pays you as salary!

Resident Nevada Corporation?

Successfully implementing a Nevada Corporation tax saving strategy does depend on a few key requirements, however. For one, while there are no residency requirements for the ownership of a Corporation in Nevada, in order to fully enjoy the tax reduction benefits, your corporation must “reside” in Nevada. This means that you must be able to show that your corporation operates or conducts its business primarily in Nevada. As proof of this, Nevada has the following requirements:

1. The Corporation must have a Nevada business address, with receipts, or supporting documentation as proof.
2. The Corporation must have a Nevada business telephone number.
3. The Corporation must have a Nevada business license
4. The Corporation must have a Nevada Bank account of some sort (checking, brokerage account, etc.).

As is evident by these requirements, a simple P.O. Box or answering service won’t suffice. In order to pass muster, there must be a living, breathing office supporting your Corporation in Nevada. The downside of opening and then sustaining an office is that it can be quite expensive, especially if the Nevada Corporation is an extension of your tax-reductions strategy and you are looking to maximize your investment in your corporation. When opening an office, you would have to factor rent, staff, utilities, telephone and data services, employment taxes, supplies, and insurance. Let’s put these into “monthly cost” perspective:

This little office just added up to a $3,500 monthly cost, and that’s with conservative estimates as to cost. Multiply this by 12, and you can see that even a basic “base of operations” office can cost your corporation $42,000 a year!

Nevada Corporate Headquarters Program

But we have a most elegant solution! We can accomplish all of this for your Corporation for as little as $995 a year! With our Nevada Corporate headquarters program, we can offer your Nevada corporation a proper office and business address (available by appointment), staffed by people during regular business hours, a live person answering your business telephone number, a real Nevada Fax number, personalized mail forwarding, and assistance with the opening of bank or brokerage accounts. All for one low price of $995 a year! And if you’d rather pay monthly, for a one year commitment, we can offer all of these features for a monthly payment plan of only $110!

These packages can save you thousands of dollars in operating expenses, while preserving all of your hard-earned, and achieved, tax reductions!

Our Nevada Corporate Headquarters Program meets and satisfies all of the standards necessary for a resident Nevada corporation determination, and these services are delivered in a knowledgeable, friendly professional manner by experienced personnel that have been providing these types of services for over 30 years! We can offer this program at such an enticing price because of our high volume of business and efficient organization! Call us today!