WE ARE NOT ATTORNEYS AND DO NOT PROVIDE LEGAL ADVICE.  If you have any doubts about whether or not it is legal to operate a Nevada corporation in your home state, we suggest you consult with an attorney.

Incorporating in Nevada even if you do not live here.  If you do not live in Nevada and you have a business that is paying high taxes in your home state, you can incorporate in Nevada and avoid your home state taxes.  This is perfectly legal.  The book mentioned on our home page, "The Secret Millionaire"  discusses using your Nevada corporation in your home state.  You can use your Nevada corporation any where in the world.  However, if your business is in California (we will use California as an example, however it can be any where in the world), and you are actually doing business in California, you will need to be in compliance with California laws (example, have a city business license, tax permit, proof of business formation like a sole proprietor, corporation, LLCs, etc.).  If you have a California corporation, you can keep your California corporation and form a Nevada corporation.  Remember, the Nevada corporation is extremely flexible which makes it very attractive to form.  

Do you have to qualify your Nevada corporation in California (or your home state)?  Yes.  If your California business has not been set up as a sole proprietor, corporation, LLC or partnership, etc.  If you were to just form a Nevada entity and do business in California under that Nevada entity, you would have to qualify your Nevada corporation or LLC with the California authorities.  The disadvantage to qualifying your Nevada entity in California is that your Nevada entity will now be subject to California's reporting, tax and fees.  However you can use creative strategies to keep your Nevada entity from having to qualify in your home state.

Usually the authorities would prove that you are "transacting business" in your home state as a foreign corporation in order for your corporation to be subject to your home state's taxes, laws, etc.   

NO.  For example, in California, your Nevada corporation conducts the business activities listed below, it would be considered exempt from qualifying as a foreign corporation in California:

• Your Nevada entity can be involved in a loan-associated activity, but have no office in California.
• Your Nevada entity can have a California bank account.
• Your Nevada entity can own or buy property in California.
• Your California entity is a subsidiary of your Nevada corporation.
• Your Nevada entity uses independent contractors for its California business.

One creative strategy:  If you form a sole proprietorship (usually the easiest and cheapest form of a business entity) or a corporation, LLC, partnership, etc. in your home state AND form a Nevada corporation, they can work together.  Your Nevada corporation will legally be doing business in Nevada and your California business will be legally doing business in California.  The advantages of a corporation are listed below.  If your California business needed money for research, consulting fees, to buy property, to enter into a lease, etc., it could borrow the money from the Nevada corporation to do so.  Just like any other loan, the loan would be secured with collateral from your California entity and would make payments to the Nevada corporation for the loan.   The board of directors of your Nevada corporation (you) determine the interest rate and other provisions of the loan to the California entity.  (Nevada has no usury laws -- the interest rate can be 20% if you want it to be.)  If your California corporation makes no money, it owes no taxes.  It's okay for your Nevada entity to make money because in Nevada, there are no corporate income tax, no personal income tax, no franchise tax, no tax on corporate shares).  

THIS MATERIAL IS DIRECTLY FROM "THE SECRET MILLIONAIRE: A GUIDE TO NEVADA CORPORATIONS"
by John Childers.

 "... you can use your Nevada Corporation to conduct business across the country or around the world if you choose to do so.  Today's teeming global business environment even encourages corporations to conduct business in states or countries other than where they were formed.  Truly successful companies are almost forced to, in fact.  at the same time, it would be horribly detrimental to your business if you were limited to just one area.  

   But how does your corporation go about doing that, since most jurisdictions will consider it a foreign corporation?  The answer is, your corporation just has to "qualify to do business" in each jurisdiction where it intends to conduct business.  Your corporation does not lose one bit of its native corporate protection just because it engages in business activity outside of Nevada.  However, the business you conduct in another state has to conform to and operate under the laws of that state.

   Qualification in another jurisdiction makes your corporation subject to all the reporting, taxes, and other fees that the state chooses to require of its own corporations.  In some states, those requirements are quite extensive. 

   If you engage in business within a state, whether it's voluntary or not, and you do not go through the state's qualification processes, then you will be considered a kind of "illegal alien" corporation.  When you are eventually caught, there will be severe consequences.  Make no mistake, with all the computers and information sharing devices used today, you almost certainly will get caught sooner or later.  Getting caught can then lead to penalties, back taxes and fairly stiff interest charges on money owed.

   In addition, should your corporation fail to qualify to do business in another state, that state can find the officers and directors of your corporation personally liable for the performance on corporate contracts.  In some states, you can even be subject to fines or imprisonment, if you knowingly transact business on behalf of an unqualified corporation.  States with these kinds of statutes include Arkansas, California, Colorado, Delaware, Hawaii, Indiana, Kentucky, Louisiana, Maryland, Ohio, Oklahoma, Oregon, Virginia, and Washington.

   In their quest for more and more tax revenue from companies, most of these states (and others) engage in frequent investigations to identify companies that are not properly qualified to conduct business in that state...

   You need to be particularly aware of your corporation's out-of-state dealings, even if your business in conducted primarily through interstate commerce and you are in full compliance with qualifications where needed...

   A key feature in many qualification requirements is how each state defines "transacting business."  Most states define that feature in the broadest of terms, and then provide exceptions to their specific rules.  It's quite possible that the nature of the business you want to conduct in a given state will automatically require your corporation to be qualified.  If so, file the necessary papers and stay in compliance.

   It's also possible that by using some creative strategies ... you will be able to structure your corporation's business so that it doesn't have to be qualified in a state, and is therefore not subject to the taxation and/or reporting requirements in that state.  However, don't try shooting from the hip on this, people.  If you're not familiar with the exemptions, go ahead and qualify your corporation anyway.  It's just good business to avoid any problems with outside jurisdictions.

   That's especially true in California, which has probably the most refined and scrutinized Corporation Code of any jurisdiction in the whole country.  California's court systems are loaded with case laws on just about every conceivable corporate situation, including the infamous "transacting business" concept.  Many states have copied from these statutes or adopted entire sections for their own use, so let's focus on California's definition as a good working example.

   In California, these provisions are found in Chapter 191 of the Corporation Code.  Under those statutes, you are defined to be "transacting business" by having entered into "repeated and successive" transactions of business in that state.  In the broadest sense then, you have established a corporate nexus in California by doing some kind of business on a repetitive basis, even if it's just selling lemonade on the street corner.

   As I said though, there are exemptions which allow a foreign corporation to be considered as not transacting business in that state.  For example, if you incorporate in Nevada to take advantage of its corporate haven and you transact business regularly in California, here are some of the things you can do within California's borders without having to qualify.  In other words, this list contains activities that are exempted from establishing a sufficient tax nexus:  In other words, IF YOUR NEVADA CORPORATION functions in any one of the following capacities, you do NOT have to qualify your Nevada corporation in California.

    1.    Your corporation owns or purchases real property in California,
    2.    Your corporation has a California bank account,
    3.    A subsidiary of your corporation is conducting business there,
    4.    Your corporation conducts an isolated transaction in California within a period of six months without repeated transactions of like nature,
    5.    Your corporation conducts its business in California through the use of independent contractors,
    6.    Your corporation holds board or stockholder meetings in the state,
    7.    Your corporation is involved in an administrative or legal action in the state,
    8.    Your corporation is involved in loan-connected activity in the state, but maintains no office there, or,
    9.    Your corporation maintains transfer agents or the like in the state for the sale of corporate securities."

IN SUMMARY, if you live in California and you want to form a Nevada corporation to purchase real property in California, your Nevada corporation can do so without having to qualify in California.  

If you want to form a Nevada corporation and can get a bank account in California (I doubt you will be able to do so), you will not have to qualify your Nevada corporation in California.  

If you form a Nevada corporation and then create a subsidiary of your Nevada corporation in California, you will not have to qualify your Nevada corporation in California (however, your subsidiary will be subject to California's tax laws, etc.).   

If your new Nevada corporation conducts its business in California through the use of independent contractors, you will not have to qualify your Nevada corporation in California.  Let's say that your new Nevada corporation hires you to operate its construction business in California.  You can work as an independent contractor of the Nevada corporation and work in California without having to qualify your Nevada corporation with the California Secretary of State.  

   By understanding the formalities involved with maintaining a Nevada Corporation in a state outside of Nevada, you are much better situated to operate your business more effectively and safely...

...

   One of the best reasons for incorporating in a haven like Nevada is to establish a business structure from the outset that helps reduce or eliminate state corporate taxes...

   What we are talking about here is a technique known in the business world as "upstreaming."  This term is generally applied to businesses that allow their company profits to legally accumulate in jurisdictions where various tax burdens are either reduced or eliminated altogether...

   ...

   Nevada has become the standard bearer for providing the same kind of favorable taxation of entities in the United States...  When companies come to Nevada, they not only get favorable tax treatment, but lots of other benefits as well...

   So why do they [many companies] want to establish whole new corporate operations in Nevada if they are already operating successfully elsewhere?  In most cases, it's because their business activities are so successful in these other states that tax considerations alone are significant enough to make such a strength worth considering.

   ... They [state corporate tax rates] can be as low as 1%, all the way up to over 12% of profits.  That's a lot of money to give up every year just because your business is located on the wrong side of a state line.

   But isn't it expensive to move all of your employees and offices and vehicles and such from one state to another, just to save on taxes?  Yes, it is.  In most cases, in fact, it is prohibitively expensive to physically move all of your business operations to another state...

   ... Assume the role of a moderately successful business owner who operates a small manufacturing company in  San Bernardino, California... You already know all about the notorious California regulatory environment, both from the standpoint of manufacturing and taxation.  Your company exists as a California corporation, and has been subject to its state corporate tax rates of almost 10% for several years.

   ...

   You employ a lot of people, all of whom are California taxpayers.  You've had to collect and pay California personal income taxes for those people, and as a result, cannot possibly be considered exempt from California taxation.  In short, you have established every facet required of a corporate nexus in California.  That, in your mind, had precluded any further consideration of Nevada's delightful corporate climate for your business operations.

   After all, a Nevada corporation would simply be forced to "qualify to do business" in California, and thus be subject to the same heavy tax burden and same corporate regulations you were already laboring under, right?  Besides all of that, you assume that the annual cost of maintaining a Nevada Corporation in California would be just as expensive or more so than a domestic corporation.  So, why go the Nevada route?

   ... California's exemptions for qualifying a foreign corporation might permit some aspects of your operations performed by a Nevada Corporation (using the proper methods) to be exempted from California taxation. 

   ...certain kinds of Nevada Corporations can operate in another state without having to qualify as a foreign corporation, simply because of the nature of the business.  And, like many people, ... you learn that the cost of filing a Nevada Corporation is not nearly as expensive as you thought it would be, particularly when compared to the potential tax savings that might result. 

   The really big revelation though, was that like most business people, you and your accountant had never really thought about converting parts of your business into separate entities to save on taxes.  All of your corporate operations are more or less lumped under one corporate umbrella, with one set of managers and one bottom line, and that's not something you are particularly anxious to change.  Or are you?

   Let's suppose then, that you and your accountant decide to form not just one, but several Nevada Corporations to implement this new strategy.  You could for example, partially finance your manufacturing company's research and development through a private Nevada financing company.  The Nevada Corporation could lend money to fund new product development in increments over a number of years.  The loan could be secured by a deed of trust on your company's California real estate, and the California company could then make regular interest payments to the Nevada Corporation.

   Your financing on this part of the new strategy could be set up any number of ways, but let's suppose that the loan is structured as an interest-only package for 10 years.  On paper, your manufacturing company is fortunate to get this kind of "back-ended loaded" financing package at all, due to its existing debt load, so it's willing to pay a higher interest rate than a more conventional loan might have required from a traditional lender in California.

   The difference in interest rates you will pay is offset by the Nevada Corporation not having to pay state income taxes on the proceeds of the loan.  Those proceeds ultimately affect the bottom line for your whole corporate conglomerate...

   The first thing is insulation from lawsuits.  You are now beginning to operate as a "secret millionaire."  Let's take a look.  The more successful your business becomes, the more liability you incur from such things as lawsuits and judgments.  However, if your primary business concern is mortgaged or indebted up to its ears, that may not be such a big potential problem for you.

   Judgment attorneys are likely to check to see what your California corporation's net worth is before accepting a case against you.  If most of your assets there are already pledged for existing debt in Nevada, a smart attorney will look elsewhere for business.  That is especially true when they learn how Nevada corporate laws work. 

   ...

   If your pockets don't appear to be so deep, sharp attorneys may determine that it's in their own best interest to require their potential client (who wants to sue you) to pay a retainer in advance and hourly fees thereafter.  And believe me, nothing goes further to eliminate frivolous lawsuits from the outset than those $200 per hour fees quoted up front. 

   The people most often targeted by such frivolous lawsuits are medical professionals, contractors, large employers, manufacturers, and attorneys.  There are two reasons these people get sued the most.  Professional people are automatically perceived to have money or other assets ...  If, on paper, you have neither of these, you just don't qualify as a big enough "fat cat" to target for a contingency fee [the lawyer gets a percentage of money if he wins the lawsuit] basis lawsuit. 

   Let's say for argument's sake that you do, somehow, get involved in a legal dispute resulting from your California business activities.  First off, your adversaries will know nothing about your Nevada corporate holdings, which will instantly reduce the likelihood of litigation.  Even if the circumstances suggest a fraudulent conveyance of assets or some kind of a sham, and it can be proven that you were somehow connected, the suing attorney will only find out then that your Nevada assets exist.  Most likely, you would then be sued in Nevada as well as California, and a judge would have to decide how the dispute is handled from there. 

   As you worried yet?  Probably not, because the primary advantage to incorporating in Nevada is that the reporting and disclosure requirements are so minimal.  While the officers and directors are a matter of public record for your Nevada holdings, the shareholders are not.  As a result, it can be extremely difficult to discover who the real owners are. 

   Your legal adversaries might get as far as the corporate resident agents in Nevada.  But, when asked for the actual stock ledgers, those agents can report that their sets of books are kept by different attorneys (with attorney/client privilege of course), in lock boxes from New Zealand to Newfoundland.  Resident agents can be the source of all kinds of useless information in cases like this.  And it's all perfectly legal.  Nevada corporate law provides you with an almost inviolable personal and financial fortress for your assets. 

   Okay, now that you've been sued and survived, let's go back to your hypothetical situation and take it a few steps further.  The in-house marketing department you have been using to make media buys, produce your promotional materials, and oversee advertising has always been something of a break-even proposition (at best) in your corporation."

   What if it can switch to using a Nevada advertising agency to provide all those services?  The ad agency might be able to purchase printing and advertising at a significant savings over what the California company had been paying, and in the process, allow you to reduce some overhead (staff) in your in-house marketing group. 

   That's good news for you, but bad news for the people who are terminated as a result, right?  No, on the contrary, nobody loses in this arrangement.  Those people who were working in-house could very easily decide to become independent contractors with a particular Nevada advertising agency which just happened to have a contract with their former employer.  Those people, then, being independent, can now work out of their homes, since they are no longer salaried employees of your California corporation. 

   Everybody wins, because instead of being paid a salary, they are paid straight commission, based on what your California company spends each month on its advertising.  These people cal also develop potential new clients for their ad agency in Nevada, since they are independent contractors. 

   Who knows?  They might even sign up a Nevada Corporation that you could refer to them, which provides financing for some California manufacturing and development companies.  If this sounds too complicated, it is in reality not all that difficult to arrange.  Remember, with Nevada Corporations, a substantial portion of what you are doing with your business is nobody's business but yours!

   This is getting interesting, isn't it?  You've gone from a simple California corporation to a corporate giant on paper, with ad agencies, finance companies, and independent contractors working for you in two states.  It gets even better. 

   Your California corporation has decided, since Nevada seems to be such a good place to do business, that your purchasing department is going to make a few changes also.  Your purchasing managers look for and find a new equipment wholesaler in Nevada that is tailor made to fill all your equipment needs.  In fact, this Nevada supplier carriers almost every conceivable item the manufacturing branch of your business needs, including computers, desks, bathroom fixtures, office supplies, chemicals, parts, and conveyers.  The items cost a bit more because of freight and handling charges, but the ease of purchasing such a wide array of items from a single source more than offsets the higher costs.

   Now, you're probably saying this is all too good to be true.  Believe me, it's not!  This is how real business is done.  This is how successful people think.  This is how millionaires make and keep their millions.  But what about taxes in all this?  ...

...

   By incorporating in Nevada, there is virtually no outside evidence of any connections in the ownership of all these businesses.  Nobody knows who really owns any of these Nevada Corporations.  They all have separate officers and directors, separate filings and separate agents.  On paper (what little paper there is) these companies may not be connected at all.  The only similarity is that each of these Nevada Corporations has become extremely profitable while paying no state corporate taxes at all.

   But what about your California operation?  It has borrowed money, invested in new equipment, contracted new outside sources for advertising, and now, is struggling to make monthly payments on all that debt.  The Nevada equipment supplier has secured its part of the debt through a series of UCC filing which give it first options to seize all equipment and inventory in the event of some catastrophic financial occurrence in your California corporation. 

   Oh, and what about the finance company note, which is being paid back over a long period of time?  It is secured by a deed of trust on the real estate, remember?  And the debt load that the note requires is leaving very little profit for the California business.  Because the California company is less profitable now, it pays state corporate income taxes that are considerably reduced from what it had been paying in the past.  At some point, the company might even pay no taxes if its profits continue to erode.  That would be a real shame for California, wouldn't it?  But you would be smiling all the way to the bank.

   Make no mistake, people.  This kind of corporate strategy is not for the faint of heart.  To make it work for your requires quality legal and accounting knowledge.  You will learn most of the nuts and bolts in this book, but my advice is to seek professional help before you implement any of the action.  whether it be a qualified attorney, accountant, or company specializing in the area of Nevada Corporations, it is crucial that you get the proper assistance.

   Success with this strategy depends on meeting or exempting your Nevada businesses from specific statutory requirements.  This, in turn, requires an attorney who is very familiar not only with Nevada law, but the laws of the state you want to operate out of as well.

   Note, too, that a Nevada Corporation will help reduce your state taxes, but federal taxes must still be paid.  Federal taxes apply unless you go a step further by setting up a tax-free jurisdiction outside the United States...

WHENEVER IN DOUBT, CONTACT AN ATTORNEY AND CONSULT A QUALIFIED TAX ADVISOR!!!!