Nevada Incorporation and Nevada LLC Formations by the professionals at Resident Agents of Nevada, Inc.

Call today (888) 463-8462.

Nevada Corporations & Nevada LLC

-Tax Considerations-

Income Taxes. Income tax strategies are important tools in preserving your income. Consider the following highlights about federal and state income taxes

Federal Income Tax. Income from all business organizations, except corporations, is taxed at individual rates. For those corporations which qualify as "S" corporations, their income also is passed through to the shareholders and is taxed at individual rates. Consider the following comparison of three federal income tax rates.

The owners of a profitable small corporation can often save thousands of dollars in overall income taxes by keeping a modest amount of profits in the corporation and paying out the rest to themselves as employee salaries and bonuses. Called "income splitting," this works because corporate tax rates on the first $75,000 of corporate income are typically lower than the owners' personal income tax rates.

Nevada Corporation & LLC Formation

-How Income Splitting Works-

As you already know, a corporation is a separate legal entity from its owners, and it pays its own income taxes. This means that if the owners keep some income in the corporation (profits that are not paid out to the owners in the form of salaries and bonuses), it will be taxed at corporate income tax rates, not at the individual income tax rates of its owners. Income that is kept in the corporation is shown as "retained earnings" on a corporation's balance sheet, and is reported on IRS Form 1120 each year.

Federal corporate income tax rates on the first $75,000 of corporate income are often lower than the federal individual income tax rates on that same amount of personal income -- particularly if the person has additional income from other sources (see the chart below). This means that the corporation's owners might face a lower overall tax bill if they leave some income in the corporation as retained earnings.


Corporate vs. Individual Tax Rates
2007 Corporate Rates
$0 to $50,00015%
$50,001 to $75,00025%
$75,001 to $100,000 34%
$100,001 to $335,00039%
$335,001 to $10,000,00034%
 
2007 Individual Rates - Single
$0 to $7,55010%
$7,551 to $30,65015%
$30,651 to $74,20025%
$74,201 to $154,80028%
$154,801 to $336,55033%
 
2007 Individual Rates - Married Filing Jointly
$0 to $15,10010%
$15,101 to $61,30015%
$61,301 to $123,70025%
$123,701 to $188,45028%
$188,451 to $336,55033%

However, this illustration does not include the fact that if any portion of the Nevada corporation's income is distributed to the shareholders, then those dividends are taxed to the individual shareholders in addition to the tax paid by the corporation--the "double taxation" whammy! Nevertheless, if the shareholders are in a lower tax bracket, or if the corporation is not currently paying dividends, then clearly the corporate form would be advantageous in this example.

Another available tool is the "S" corporation. By making this election, your corporation is not taxed as a separate entity, but the earnings of the business are passed through to the individual shareholders and are taxed at their individual rates.

State Income Tax. How much did your business pay to your state in income taxes last year? Whatever the amount, by arranging your business affairs so that your Nevada corporation actually earns a portion of your business income, you can easily reduce, or possibly eliminate, state income taxes on your business. Remember, Nevada has no corporate income tax and no individual income tax.

Other Taxes. Your state probably has one or more of the following taxes which it imposes on corporations in your state. Use the checklist to compare your state's "other taxes" with those of Nevada.

Tax Comparison Chart

 

Registered Agent Services

Make It Happen - First Year Things to Do

Choice #1 - Do It Yourself

You can travel to Nevada and spend $5,000 or more to:

 

Choice #2 - Let the Experts Do It For You