Benefits of Nevada for Business Formation
Favorable Tax Structure
Nevada has no corporate income tax or personal income tax. This can substantially lower a company's overall tax burden compared to incorporating in other states that impose corporate and/or personal income taxes. This benefit applies to C corporations and pass-through entities like LLCs.
Privacy & Anonymity
Nevada laws allow company owners and principals to maintain a high degree of anonymity. Unlike some states, public shareholder names and addresses are not required to be listed. Directors and officers can use nominee officers to keep their names off public records. This appeals to those desiring privacy.
Flexible Business Entity Options
Nevada offers specialized entity types that allow businesses to segregate assets and limit personal liability. For example, Nevada has complex LLC structures like Series LLCs which establish separate series or cells within a single LLC. Each series has designated assets and owners, to limit exposure across the LLC.
Ease of Formation
Forming a business in Nevada is straightforward and can be done rapidly. You can file Articles of Incorporation or Organization electronically for immediate approval after paying only a nominal $75 filing fee in most cases. There are no pre-clearance requirements for company names or lengthy processing delays.
Protection from Lawsuits
Nevada incorporates the law in a way that makes it difficult to "pierce the corporate veil" - allowing company owners to be shielded from personal liability for company debts or legal claims in many instances. The protective legal climate gives added security.
Accessibility
With major airports and developed infrastructure, Nevada offers easy transportation and logistical access for both domestic and international visitors and businesses. Its connectivity facilitates business travel and commerce.
Selecting the Right Business Entity Type
Corporation
A corporation is a distinct legal entity owned by shareholders. It provides limited liability protection for owners but requires adhering to corporate formalities like issuing stock, appointing directors, and holding shareholder meetings. Corporations can raise investment capital by selling stock. But income may face double taxation.
Limited Liability Company (LLC)
LLCs provide owners (called members) protection from personal liability while allowing pass-through taxation similar to partnerships. Compared to corporations, LLCs involve less record-keeping and administration. LLCs combine flexible management with limited liability for members.
General Partnership
A straightforward structure where two or more co-owners share in the profits and management of a joint business operated for profit. However, partners have unlimited personal liability for debts and lawsuits.
Limited Partnership
Has both general partners who manage and hold liability plus limited partners who have minimal control and limited liability. Limited partners cannot participate in management or they risk losing liability protections.
Sole Proprietorship
The simplest and most common structure for small businesses or freelancers, requiring minimal administration. However, the business owner has unlimited personal liability for all debts and lawsuits.
Nonprofit Corporation
A corporation formed for religious, charitable, social or educational purpose rather than for profit. To qualify for federal tax-exempt status, nonprofits must meet requirements like filing Form 1023.
Step-by-Step Process to Register Your Business
1. Choose a Distinct Business Name
- Research Nevada’s naming conventions for corporations, LLCs etc.
- Select a name that meets requirements and availability rules.
- Perform a name search on the Secretary of State website before filing.
- Add entity designators like Inc., LLC, Corp. or abbreviations as required.
2. Appoint a Registered Agent
- All Nevada companies must designate a registered agent located in Nevada. This agent will accept service of process and official documents on behalf of your business.
- Options include hiring a third-party registered agent service or appointing a trusted individual resident in Nevada. Virtual offices do not qualify.
3. File Formation Documents
- For a corporation, file Articles of Incorporation with the Secretary of State.
- For an LLC, file Articles of Organization. Other entities have specific formation documents.
- Draft articles based on templates, meeting statutory requirements. Identify name, purpose, capital structure, and more.
- File online for immediate access or use paper filing for extended review of complex entities.
4. Pay State Filing Fees
- Pay the filing fee when submitting formation documents.
- Fees start at $75 for electronic filing and $100 for paper filing of Articles of Incorporation/Organization.
- LLCs with complex structures like Series LLCs have higher fees of $200/$500 for electronic/paper filing.
- Nonprofits pay reduced fees of $50 for electronic filing.
5. Make an Operating Agreement (Recommended for LLCs)
- Create an operating agreement especially if forming an LLC.
- Outline member capital contributions, profit/loss distributions, voting procedures, management roles and other governance matters.
- Establish rules aligning with your business relationship, needs and regulatory compliance.
6. Obtain Necessary Business Licenses
- Acquire any required state, county or municipal licenses for your operations. Common examples include:
- Business license (state)
- Sales tax permit (state)
- Industry-specific licenses e.g. contractor, liquor, cannabis etc.
- City/county general business license
7. Get an EIN from the IRS
- Acquire an Employer Identification Number (EIN) from the IRS, used for payroll, banking, taxes and identification.
- Apply online through the IRS website. Nonresidents can obtain an EIN.
- This step is crucial for opening business bank accounts, hiring employees and filing company tax returns.
8. Open Business Bank Accounts
- Open company bank accounts separate from your personal finances.
- Provide documents like EIN, formation filing, and ID when applying.
- Options like online banks allow nonresidents to open accounts without being physically present.
9. Remain Compliant with Requirements
- Maintain active business registration status by filing annual lists and paying state fees.
- Stay current on business license renewals and tax filings and payments.
- Keep a valid registered agent at all times at the Nevada address.
- Follow applicable regulations and laws at both state and federal levels.
Frequently Asked Questions
Can a nonresident act as a director or officer of a Nevada corporation?
Yes, Nevada allows nonresidents to serve as directors and officers of a Nevada corporation. There are no residency requirements for these roles.
What are the requirements to maintain a Nevada LLC annually?
To remain active each year, Nevada LLCs must file an annual list of managers/members by the last day of the anniversary month of formation and pay the annual state fee. Failing to comply can lead to dissolution.
What are the main tax filing requirements for a nonresident with a Nevada LLC?
A nonresident owning a Nevada LLC must file annual federal tax Form 1065 to report company profits passed through to the member's 1040-NR return. You may need to file other forms like 5472 if operating a foreign-owned LLC. Work with a specialist to understand your tax obligations.
Can a nonresident open a business bank account in Nevada without traveling there?
Many banks allow nonresidents to open Nevada business accounts online without being physically present. However, specific requirements vary by bank so research options. Presenting an EIN, formation documents, and ID are generally required.
What are the key mistakes nonresidents should avoid when starting a Nevada business?
- Not hiring an attorney and tax specialist to ensure full compliance.
- Failing to designate a compliant registered agent properly located in Nevada.
- Not filing/paying annual lists and state business fees to stay legally active.
- Performing activities before obtaining necessary licenses.
- Not understanding U.S. tax laws and filing requirements before operating.
What options exist if a nonresident cannot manage their Nevada company full-time?
Options include hiring a local management company for hands-on support, appointing a trusted Nevada partner or manager, granting power of attorney to a Nevada representative, using digital tools to collaborate remotely, retaining specialized registered agent services, and traveling periodically to directly oversee operations.
Can a nonresident qualify for Nevada business incentives and programs?
Yes, some Nevada economic development incentives allow nonresident eligibility, like tax abatements for capital investments that create new jobs. Other programs support exporting. Do thorough research and consult local specialists to identify incentives fitting your business situation as a nonresident.
What are the resident requirements for a Nevada Series LLC?
Under Nevada law, a Series LLC must have at least one member resident in Nevada to have the right to establish series. Alternatively, a nonresident can establish a Nevada C corporation which can then own a Series LLC as its subsidiary. Consulting a business attorney is advisable when exploring Series LLC structures.
