NASE Blogs

From the Trenches ... Should I Keep My Corporation Registered in Nevada?

Saturday, September 18, 2010

Q.        I have a corporation that I registered in Nevada using a Nevada company as my registered agent but my business is actually located in Colorado. I went to a seminar and was sold on the benefits of having a Nevada corporation versus just filing in my own state. Now, I am questioning why I have the Nevada Corporation because I have not seen any of the benefits that I was told I would get. Can I ... and should I ... un-register in Nevada and re-register in Colorado?

 

A.        The answer to your question “can I” is yes ... you can “un-register” the corporation in Nevada and reform in Colorado. As for your question “should I”, that will take a little number crunching.

You are among thousands of businesses every year that fall for the sales pitch that being registered in Nevada (or Delaware) will give you more legal protection and tax advantages. The reality is that the numbers of businesses that benefit from incorporating in any other state than the state they actually do business in are very few. Of course the companies trying to convince you to pay them several hundred dollars a year to have their name on a piece of paper and then pummeling you with other sales pitches for add-ons after the initial sale would disagree with my statement.

As for the legal benefits ... Unless you will be running a business that plans to lie, cheat, and steal from your customers, you don’t have to worry about keeping your identity hidden by incorporating in Nevada. Or, if you are a business that will be going public or have a physical presence (offices and/or employees) in multiple states ... a Nevada or Delaware corporation might be a viable option.

The most predominant reason to incorporate in Nevada is the potential tax benefits due to tax loopholes in some states ... which have been quickly closing over the past years. Again, the number of small businesses that benefit from this strategy are very few so before you make your final decision to dissolve the Nevada Corporation sit down with a tax pro to help you determine if there is any financial benefit for you to continue in your present form.

If the outcome is that there is no benefit, you can file a corporate dissolution with the Nevada Secretary of State office and then re-file in Colorado. Legally, you should already be filed as a foreign corporation in Colorado ... something not all the Nevada folks tell their customers. If you are filed as a Colorado foreign corporation you can request the Colorado Secretary of State to convert your foreign corporation to a domestic corporation instead of going through the entire incorporation process.

A word to the wise for all small businesses is that before you take that Special Deal only available today from someone trying to sell you on incorporating in any state other than your own ... spend a couple hundred dollars to get the opinion of a good tax advisor and ... if necessary ... an attorney. In the long run you could save yourself a lot of money and extra headaches.

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