Nevada Business Llc
Should I incorporate in Nevada as a California resident for tax benefits?
I have an LLC that is formed in California as of a few months ago. I am the sole employee. As business picks up, I am looking for some tax breaks. If my business is strictly online (no physical office) an we do business across the US, I understand that it is OK to incorporate anywhere in the U.S. I also understand that Nevada has no state tax. What I’m confused about is this: even though it has no state tax, won’t I have to pay California state tax when I take the money out for personal use as salary to myself? I do not see the actual benefit of incorporating in Nevada if I pay myself as a California resident. If you do recommend going through Nevada, should I incorporate my LLC in Nevada or just form a new company altogether? Thank you so much!!
If you are the only owner of the LLC, then you don’t pay yourself a salary unless you are one of the few people who opt to have an LLC taxed as a corporation and you file Form 1120 or 1120S. More likely, your LLC is a disregarded entity so you have to file Schedule C with your tax return.
Yes, since your business is performed in California, you must pay taxes to that state. Therefore, there isn’t an advantage for you to form your LLC in Nevada.
Furthermore, I believe that you need to spend some time with a tax advisor such as a CPA who specializes in taxes or an Enrolled Agent (EA). It sounds like you don’t understand taxes enough to make decisions on your own.
I hope this helps.
Gary