Can a California Corporation Do Business in Nevada to Save on Taxes or Fees?

Owners of a California corporation may wonder from time to time wonder whether it would be cheaper or save money on taxes or fees by doing business in Nevada instead of California. These days it seems easy to do business in any state or country in the world, but there are steps to take if you want to do business in other states. Can a California Corporation do business in Nevada to save on taxes and fees? The answer might surprise you.

Getting Domesticated

In Nevada, if you are conducting business within the state but are registered as a California corporation, your business is considered a “foreign entity” and must be qualified to transact business in Nevada.

To qualify in Nevada, a corporation must file what is called a “Qualification to Do Business in Nevada” form with the Nevada Secretary of State, provide them a stamped copy of your Articles of Incorporation from the California Secretary of State, pay the filing fee, and appoint a registered agent located within the state to accept service of process. An annual business license is also required by any entity doing business in the state of Nevada.

In addition to all of this, your corporation must also meet publishing requirements. Generally, all foreign corporations must publish a statement in two different Nevada newspapers. The statements must be published no later than the end of the third month after the close of each fiscal year.

It costs time and money for any California corporation to be authorized do business in Nevada, so you must consider the advantages versus the disadvantages of doing business in Nevada before moving forward with this business decision. The benefits include expanding your potential scope of income by casting a wider net in a smaller but less saturated market and the lower cost of running a business out of Nevada versus California’s higher cost of property taxes. Doing business in Nevada has its tax perks as well since there is no state income or capital gains tax, but you may still be subject to California income taxes if any income is earned in California.

The Foreign Qualification Process

The foreign qualification process is not complicated, it just takes a few steps to accomplish. To do business in Nevada, you’re a California Corporation will need to first authorized the company to do business in Nevada. This involves having the appropriate shareholder resolutions prepared for both the shareholders and the Board of Directors. The Board of Directors resolution authorizing the domestic qualification in Nevada should occur first. Once this occurs, the issue to be presented to the shareholders and usually if everyone is in agreement, it can be accomplished through a written consent in lieu of actual meeting. Once you have the two sets of resolutions that have been signed by all shareholders and directors, respectively, then the Corporation is ready to do business in Nevada. The Nevada qualification form should be completed fully, signed, dated, and mail to the Nevada Secretary of State for processing. To access this form, click here: http://nvsos.gov/Modules/ShowDocument.aspx?documentid=653.

Getting Copies

When you’re submitting your foreign qualification paperwork with the Nevada Secretary of State, remember to ask for an extra certified copy. Banks generally require a certified copy of your foreign qualification forms authorizing your California Corporation to do business in Nevada before allowing you to open up a bank account in Nevada. If you plan on having a real estate lease, employees, or other ground operations in Nevada, you may decide to have a bank account opened in Nevada for your businesses operations. Furthermore, Nevada law requires that a certified copy of a business’ foreign qualification form be kept in the office of its registered agent, so your registered agent (see below) may ask for hard copy of this. In addition, you should have a certified copy for your records, simply for corporate governance of record-keeping purposes. When you file your foreign qualification paperwork, the Nevada Secretary of State would generally provide you with one file stamped copy and no additional charge. Getting additional certified copies are $30 per certification with $2 per page if ordering more than 2 certified/file-stamped copies.

You should enclose a self-addressed stamped envelope in your mailing to make sure your file-stamped copies are returned to you properly.

Filing Fees for Doing Business in Nevada

When filing the foreign qualification form to do business in Nevada, you will have to pay a filing fee. In Nevada, the filing fee is based on the value of the total number of shares authorized. The fees generally range from $75 – $375 (though greater for large corporations valued very high) . The attached fee schedule can be accessed at the following link: http://nvsos.gov/Modules/ShowDocument.aspx?documentid=653 . Because most new corporations and startups value shares very low (i.e., $.001 or $.01 per share), the initial fee will likely be $75.

Your Registered Agent

Remember to make sure you line up a registered agent in Nevada to handle receipt of all legal notices. If you are not sure where to get a registered agent, simply search for one in Google or any other search engine, and dozens will appear offering discounts. You should generally not have to pay more than $150 a year for registered agent services.

Filing a Statement of Officers

While your foreign qualification forms processing with the Nevada Secretary of State, please also remember to file a list of your officers, directors and registered agent, with the Nevada Secretary of State, as is required by Nevada law. The filing fee for this is $150.

Filing fee is based on the number of shares authorized. Please see the attached fee schedule. The filing fee for a nonprofit corporation without stock is $50.00. Filing may be expedited for an additional $125.00 expedite fee. NRS 80.190: This requires each foreign corporation doing business in this state to publish a statement, not later than the end of the third month following the close of each fiscal year, of its last calendar year’s business in two issues of a newspaper published in this state that has a total weekly circulation of at least 1,000. Refer to NRS 80.190 for the required contents of this report. The Secretary of State does not publish or file these statements.

Getting Legal Help

Before deciding if Nevada is the right location to transact business for your California corporation, consider all the legal requirements and financial advantages and disadvantages of doing business in Nevada. AXIS Legal Counsel represents clients in numerous types of business litigation disputes, lawsuits, and claims. AXIS offers representation to numerous clients involved with business litigation, including corporations, LLPs, LLCs, partnerships, and their CEOs, presidents, executive directors, developers, entrepreneurs, founders, owners, start-ups, investors, partners, directors, employees, and numerous others, in numerous business disputes and disagreements. AXIS assists clients with breaches of contract, business torts, breaches of fiduciary duty, competitive business practices, complex litigation, contract disputes, defamation/slander, online reputational damage, partnership disputes, real estate litigation, services contracts, supply/distribution disputes, shareholder claims, non-solicit agreements, non-competes, trade secrets, patent litigation, trademark litigation, copyright litigation, and numerous other types of disputes.

For information on retaining AXIS Legal Counsel to represent your company in a business dispute, contact info@axislegalca.com or call (213) 403-0130 for a confidential consultation, or visit our Business Disputes & Litigation Practice Area or Business & Startups Portal for additional information.

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2015-08-20

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Can a California Business Do Business in Nevada to Save on Taxes or Fees?

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