Tax Strategies

Nevada has no state income tax — on individuals or corporations. No corporate or personal income taxes. Compare to California: 9.3% tax on personal income over $39,133.

Example: If your public corp is a car dealership, your Nevada LLC purchases vehicles from your supplier, marks them up to near retail, and sells them to your public corp for resale. All profit from the vehicle sales stays in tax-free Nevada.

In a high-tax state like California, overall tax savings can be substantial.

Corporations receive many tax benefits not available to other entities:

• Tax deductions for group accident, health, and retirement plans
• With proper structure, C-Corps pay less tax than individuals
• Profits taxed at corporate rates on a separate 1120 return
• Profits can be kept as retained earnings or distributed to a retirement plan to defer taxes
• The board can determine their own "corporate year" — deferring taxes for up to a year
• Many perks and fringe benefits are fully deductible
• Shareholders don't pay self-employment taxes
• Any business-related expense is deductible (that car for business, that client dinner, that dress for a business event)

The biggest downside of a C-Corp is double taxation — profits taxed initially, then dividends taxed again at the personal level. But it can be easily avoided:

• Proper tax planning
• Retain the corporation's profits for future use after they've been taxed at the corporate level
• Defer profits to a retirement plan instead of distributing to shareholders

Use one corporation to do business with another to reduce profits and assets to near zero:

The Private LLC files UCC-1 liens on personal assets with equity, other corporate assets with equity, holds deeds, pink slips, titles, trademarks, copyrights, and the public corp's stock.

Sign over the title of your home or office building to a non-profit organization you form. You can form your own church or organization and apply for tax-exempt status at your county courthouse. Under this arrangement, you retain lifetime habitation rights — the property belongs to the non-profit.

All real estate purchases have definite tax advantages:

• Mortgage interest deduction — deduct from gross income on your primary residence
• Rental property — deduct all expenses from rent received, plus depreciation on the house
• Depreciation — compute over 15 years (likely gives a tax loss even with cash income). Cannot depreciate land value, only the building
• Renting to relatives — since 1981, family tax savings are available in certain situations

Appoint yourself as President of your own non-profit organization. Have the organization supply you with business attire and a "free" vehicle — all as expenses. If your organization is church-related, you could tour Europe for free to visit church cathedrals. A church can raise money by "selling" charters, degrees, and other documents for hundreds of dollars — and it's all legal.

One of the key advantages: corporate credit is tax deductible. With the exception of your home, personal credit is NOT tax deductible. This is another reason to separate your personal and business finances — the tax savings alone justify incorporation.