Posted by Mike Schmidt (IL) on July 23, 2001 at 23:22:15:
Opps $400
A Definitive Answer re Nevada Corp.s , Pleeaase! - Posted by TJ
Posted by TJ on July 22, 2001 at 23:30:31:
I’ve been looking into setting up a Nevada corporation. The people soliciting me to set it up explained how it works. One thing it can achieve is income tax reduction. This apparently works by having the corporation loan you money, say on some income property. Since I now have to repay the debt I can deduct the interest thus reducing my income taxes in my home state. The income realized by the Nevada Corp owned by me is not subject to any state income tax since Nevada has none. Meanwhile, this arrangement affords asset protection since I have encumbered the assets to a higher degree, giving the lender (my own Nevada Corp) a claim prior to any creditor on the encumbered part.
All this makes Okay sense to me, but just to make sure I called my tax guy and he snapped at me and said these guys hawking Nevada Corporations are just a bunch of con artists. I felt too sheepish to ask him why. He’s a good tax guy, but is he just not well-informed about these set-ups, or is he right?
Any answer to this would be greatly appreciated.
TJ
Re: One Answer re Nevada Corp. - Posted by SueC
Posted by SueC on July 23, 2001 at 07:37:52:
OK, so your Nevada Corp. is making all this money, on interest, right? (Well, if you’re paying interest to it, that is.) Where is it showing up? Is it just sitting there in the corp? Because if it is, the IRS can come along and make you declare a dividend - and who gets taxed on that? You do, where you live. Want to take $$ out of the Nevada Corp? Ok, pay a salary to yourself, deducted as a business expense to the corp. Who pays income tax on that? You do, where you live. And your corp. is still paying federal income taxes.
The only really useful purpose of a Nevada corp. is if it is doing business ONLY in Nevada. If you ar using it for your RE deals, you’re wasting your time because you still most likely have to register and pay taxes as a foreign corp in the state in which you’re doing business. But the concept gets sold to people because there are no income taxes in Nevada, and privacy for corporate shareholders. (Same thing sort of with Delaware. Hey, for MBNA and BIG corps it makes sense. For Joe Investor starting out making under $50-100K a year on his investments, it’s ridiculous.)
These types of strategies might be useful for someone with a LOT of income they need to hide or otherwise manipulate to save big time tax dollars. For beginners, it’s probably not worth the aggravation. Especially if you don’t understand the details and are getting your info from the people trying to sell you the services.
Save your money, form an LLC for about $100 with little or no annual paperwork requirements, and make your life easy.
Just my $.02, others may disagree.
Re: A Definitive Answer re Nevada Corp.s - Posted by Tom – IN
Posted by Tom – IN on July 23, 2001 at 24:22:02:
A couple of points here to consider. Sooner or later, the profit from the Nevada corp has to come back to you, and at that point it’s probably taxable, both Federal and state.
Second point. Many many authors selling courses and book on this site and others will sell you a course so that you can set up your own corp at little or no cost, and then turn around and do it again and again. The Nevada guys want you to pay them big bucks to do it once.
I know what I’d do…
Re: One Answer re Nevada Corp. - Posted by Mike Schmidt
Posted by Mike Schmidt on July 23, 2001 at 15:45:58:
Off topic but just a note on the LLC. Not all states are as cheap as $100, here in Illinois is closer to $400 to setup a LLC. Much cheaper to set up a Corp than LLC here.
Re: Second Answer re Nevada Corp. - Posted by HOuserookie
Posted by HOuserookie on July 23, 2001 at 12:06:57:
About the only way to get money out of Nevada corps or any corp is through expense deductions. Some corporations offer employees and officers big “benefit” packages. These are deductible by corporations, yet not considered as income to employee. There are about 20-30 different kinds of benefits a corporation can afford for its officers.
A second method ( with careful planning ) is through loans to the officers from company.
As for assets protection, the laws regarding sister states make it virtually impossible to do real estate in home state, using a Nevada corporation as storefront. The issue becomes, “where is the RE located.” And judgements can be attached in the state of RE.
Most businesses that generating 100K or less revenue will not benefit from NV corps. The expenses to setup and maintain a valid corporation would surpass profit.
At the present, the only business that could benefit from Nevada coporations are internet related businesses.
You can litterally operate from anywhere, and revenue is not solely based in home state.
Take CREonline.com for example. The website is registered in CA, yet the last I checked,
the BBB logo recognizes it as a Nevada company.
HOuserookie
Re: One Answer re Nevada Corp. - Posted by Bill Gatten
Posted by Bill Gatten on July 23, 2001 at 20:15:36:
Click on our banner ad here on CRE Online and form one for $199 with a 20% discount. Any state. filing fees may vary, but the set up is always the same.
Bill Gatten
Re: One Answer re Nevada Corp. - Posted by Mike Schmidt (IL)
Posted by Mike Schmidt (IL) on July 23, 2001 at 22:53:31:
Thats what I was getting at, the filing fee here is $300.