New Increased Nevada Entity Fees (and a Solution to Them)

/about-garrett-sutton/The state of Nevada legislature and governor approved higher business taxes last week. Some of the changes have been identified. Others have not seen the light of day.

We do know that business license fees have increased. For profit corporations will have annual fees of $200 increased to $500. This applies to private corporations, close corporations, public benefit corporations and foreign corporations. Fortunately, this increase does not apply to limited liability companies or limited partnerships.

For all entities (corporations, LLCs and LPs alike) the initial and annual list of officers or managers fee increases by $25 to $150 per year.

As such, corporations face an increase of $325 whereas the fees for LLCs and LPs are increased by just $25. (For a corporate solution to these fees see the last paragraph of this notice.)

The gross receipts tax is a bit murkier. A call to the Nevada Department of Taxation revealed that their division had not yet received the new language of the bill. The affable and candid service representative said that since the new taxes go into effect on July 1, 2015 they should have the information by then.

Newspaper reports indicate that a gross receipts tax was indeed passed. This is a tax on money coming in the door, your gross income unreduced by expenses. It is not a tax on profits. You can be losing money and still owe the gross receipts tax. This tax apparently has 27 different rates, depending upon your business type and the nature of the revenues. The tax will also apply on revenue that out of state companies generate within Nevada.

Supposedly, businesses earning less than $4 million a year will be exempt from this tax on gross receipts. The tax department service representative said that such an exemption may not survive. Did I say this was murky?

The payroll tax, which was due to expire in June of 2015, was extended and made permanent. For most companies a tax of 1.475% will be assessed against employee payroll payments. For mining and financial institutions the rate is 2%. Businesses will be able to credit 50% of their gross receipts tax against the payroll tax.

With 27 different gross receipts to monitor, new taxes on out of state company transactions and payroll tax collections subject to gross receipt reductions, it is clear that the Nevada Department of Taxation is going to have to staff up. The big picture: The expansion of the state workforce, with more salaries and pension obligations, may be the most significant consequence of this new legislation.

On a entity level, many clients may want to transfer out of Nevada to avoid the $650 annual corporate fee. (Others, knowing Nevada is the only state with charging order protection for corporate shares, may want to stay put.) For those wanting out you can ‘continue’ your Nevada corporation into Wyoming. You keep the same incorporation date, same EIN and same business credit when you continue into Wyoming. Your Nevada corporation formed in 1995 becomes a Wyoming corporation formed in 1995. The total cost of continuance (both legal and state filing fees) is $995. Then your annual Wyoming fees drop to just $50 a year. This may be more to your liking than the $650 annual Nevada fee.

For more information on continuance into Wyoming please call us at 1-800-600-1760 or contact us.

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