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Thinking about incorporating your business or investment in Nevada? Consider these seven tips to make the process easier, to minimize mistakes, and to avoid trouble.
Tip #1: Don't choose Nevada unless you operate in Nevada
Let's get this first tip out of the way right up front. Nevada incorporation makes sense for businesses and investments located in Nevada. Nevada incorporation does not make sense for non-Nevadan business.
Here's why: If a Nevada corporation operates, owns property or employs people in another state, the corporation owes income taxes and franchise taxes to that other state. Anybody who tells you different doesn't understand how multi-state taxation works.
Tip #2: Consider both an LLC and a corporation
Here's another quick tip: A traditional corporation isn't always the best model for your small business. Nevada businesses actually have two great options for minimizing their legal liabilities. Businesses can go with a traditional corporation. Or businesses can use a limited liability company--which you can think of as a "lite" version of a corporation.
Many lawyers and CPAs recommend the limited liability company option over the corporation option. An LLC requires less paperwork and lets the business owner choose how the entity will be treated for federal income tax purposes.
Tip #3: Get Free Forms from the State of Nevada
Even if you're going to employ an outside professional or work with an incorporation service, you should grab the free forms and instructions available directly from the state of Nevada web site at:
http://sos.state.nv.us/business/forms/all.asp
You may not choose to complete the forms yourself. But the forms will help you "ask the right questions" if you have someone else prepare the paperwork for you.
Tip #4: Pick a Multi-State Friendly Name
If there's a possibility that you'll operate your corporation or LLC outside Nevada, be sure you pick a name that works in other states.
A corporation name that ends in "Corporation," "Corp," "Incorporated," or "Inc." works pretty much everywhere, for example. An LLC name that ends in "Limited Liability Company," "LLC," or "L.L.C." also works pretty much everywhere. Not all of the other allowable Nevada corporation and LLC names always work, however.
Tip #5: Don't Forget About the EIN
You may be required to get an employer identification number (EIN) for your new LLC or corporation. In fact, the only time this won't be the case is if you're setting up a one-owner limited liability company that won't have any employees.
One easy way to get an EIN is by downloading a paper copy of the Form SS-4, "Application for an Employer Identification Number," from the www.irs.gov web site, completing the SS-4 form, and then mailing the completed SS-4 to the appropriate address.
Tip #6: Remember to Make Any Relevant Tax Elections
Both limited liability companies and corporations may make elections with the Internal Revenue Service that save the business substantial amounts of income and payroll taxes.
A traditional corporation, as an example, may elect to be treated as a Subchapter S corporation. And an LLC may elect to be treated as a regular corporation or as a subchapter S corporation.
You'll want to consider making these elections. A good place to start your research is at the IRS's web site, www.irs.gov.
Tip #7: Yelp for Help if You Get Stuck
If you have trouble incorporating, contact the Nevada Secretary of State's office. If you have trouble getting the Internal Revenue Service to process your SS-4 or an election, telephone the local IRS office.
In most cases, you'll find the customer service people helpful and friendly. And if you're stuck, an easy answer from the appropriate government agency may be all you need to put the process back on track.
Seattle tax accountant Stephen L. Nelson is the author of two ebooks about Nevada incorporation: Incorporating in Nevada and Forming a Nevada Limited Liability Company. Nelson is also the author of the small business best-seller, QuickBooks for Dummies.
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