california corporate law

Once you have decided that integration is beneficial for your business, some people who live in countries outside their home country. Above all, Nevada has been adopted by many," the services "as a tremendous advantage as opposed to the customer home state. Other states such as Delaware and Wyoming have recently also for the testing. In some cases, depending on the facts of your company, there are some advantages of out-of-the-Home-state enterprises in countries such as such as Nevada. But in most cases the benefits of forming a Nevada Corporation, is simply a myth and is often more expensive and troublesome than filing in the company's home state.

Law of the Land: Foreign companies,

This may be a surprise to many, as a rule, companies will be governed by California law, even though they are in Nevada. Suppose that a Nevada, yet you work all your transactions in California. Under this scenario, you as a "pseudo-foreign" Corporation. If the company is a pseudo-foreign corporation, California law in many areas replaced the law of the State in which the company was in. (See California Corporation Code § 2115 (b)). Therefore, for companies with headquarters in California and doing business in California, almost all of the alleged benefits of incorporating in Nevada are out the window. It should be noted that when a Nevada Corporation in California, not as a foreign company, there may be a series of sanctions. (See California Corporation Code § § 2203, 2258, 2259).

Nevada v. California

The advantages generally promoted by a Nevada Corporation are the following: lower costs, taxes and more privacy. But is it true that all? Below we discuss some of these issues.

Cost: Contrary to what many people believe it is more expensive to file in Nevada in California. Here are some of the additional cost: The first registration fee is the communication of information is much more, you will be asked to make a statement and designation of Foreign Corporation in California, and you are prompted for a Nevada Agent for Service of the year. For large customers, the additional cost (about $ 500 more) is not large, but for smaller companies every dollar counts.

Taxes: The tax impact is usually one of the main reasons for the decision whether to and where. Nevada Secretary of State website says that Nevada has none of the following: (1) corporation, (2) taxes on corporate profits shares; (3) franchise tax, and (4) no personal income tax. How does it actually play? The essence is, if you are anywhere other than Nevada, you are still required to pay taxes in the state where you are in business. So, if you are operating and generating business in Nevada, so it can be a great advantage, because otherwise, if you generate money in California, you are obliged to raise taxes in California. In addition, all income from a Nevada and pay for a residence in another state to be subjected to taxation in the Member State concerned. Therefore, the profit to the shareholders of an S-Corporation in Nevada will be taxed both at the federal level and in the state in which the shareholder lives (this also applies to other pass-through entities such as LLC).

Just as in the above, you are not able to legally win Nevada tax benefits if you have a Nevada pass-through entity like an S-Corporation or LLC. However, a Nevada C-Corporation can avoid state taxes (do not forget that a C-Corporation is one of the double taxation at the federal level). The way in which a C-Corporation in Nevada, California could be structured, and to minimize their taxes is as follows: In the C-Corporation, your company will be stuck with double taxation at the federal level. Instead of the profits from the company to profits within the Nevada C-Corporation, it is to grow free of state taxes.

Limited Liability Protection: Whether your company in a larger company with limited liability protection in Nevada compared to other states is questionable. Many believe that Nevada state before making piercing of corporate veil much more difficult. Whether that is true, will depend on whether the facts of the case and how good your lawyer is, as the Test for Piercing the Corporate Veil in the two states are substantially similar (both California and Nevada, that a substantial injustice or maintaining a fraud has occurred ). However, in relation to the directors and officer liability, Nevada law provides that directors and officers are not liable for damages resulting from a breach of fiduciary duty, unless the violation, the willful misconduct, fraud, or to know against the law. (See Nevada Rev. Stat § 78.138 (7)).

Jurisdiction: This can be good or bad for your business. If you are in California, but are a Nevada Corporation, the question arises as to which state law takes precedence? As already mentioned, in most cases, your company is seen as a pseudo foreign corporation and thus be subjected to California's laws. So, if you are sued, the action would likely be in California. However, if the plaintiff tries to Pierce the Corporate Veil, the action can occur in Nevada, so that the applicant would have to include additional costs to travel to Nevada to try the case. Just as the defendant would be required to be Nevada. However, if you are in the contracts with others, your contract can be "choice of law jurisdiction" provisions, which require that the contract falls under the laws of Nevada. Similarly, "choice of forum" in your contracts will be your case to be heard in Nevada.

Privacy: Nevada is generally more stringent than most states in the exchange of information on the company with other states and the government. As such, many celebrities and high-ranking individuals, often at the end of anonymity, in Nevada. However, both California and Nevada does not require its shareholders to be included in public documents. Further, Nevada does not exchange information with the IRS, as opposed to California. But if a business as a Nevada Corporation pseudo foreign corporation in California, it is required to provide the information to the IRS.

© 2006 Michael N. Cohen, Esq.

This article is not intended as a substitute for legal or tax advice. The specific circumstances which, to your question may be the result differently than expected, would be from you. You should consult with a lawyer with the issues and the laws.

Michael N. Cohen, Esq. is a business and intellectual property lawyer and is the principal in the law firm of Michael N. Cohen, PC, headquartered in Beverly Hills, California, USA. See http://www.patentlawip.com or contact Mr. Cohen at 310-288-4500.