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Note: If you live in Nevada, do business in Nevada, or are a non-US resident, then this information doesn’t apply to you.
Regardless of what you’ve read online, most people should not be forming an LLC in Nevada.
In order to best explain the reasons, let’s look at an example:
- Daniel is a resident of California
- He runs an online business from his home in California
- He reads online that “Nevada is the best state to form an LLC“
- He forms an LLC in Nevada
Let’s discuss the issues that will arise in this situation.
Domestic LLC vs. Foreign LLC
If you form an LLC in your home state, this is called a “Domestic LLC”. Meaning, the LLC is domestic to that jurisdiction.
If you want this Domestic LLC to do business in another state (a different jurisdiction), you must register that LLC in the new state. Once that LLC is registered, it is known as a “Foreign LLC”.
It’s technically just one LLC. The LLC originally has authority to do business in its home state, since that’s where it was formed. And then it must file as a Foreign LLC in every state it wishes to do business.
So in our example, Daniel has only formed a Domestic LLC in Nevada.
(for more info, please see: domestic LLC vs foreign LLC)
Nevada LLC Illegally Doing Business
Since Daniel is running his business from his home in California, his Nevada LLC is illegally doing business in California.
In order to avoid fines and penalties, he must register his Nevada LLC as a Foreign LLC in California.
Foreign LLC Registration
In order to remedy the fact that Daniel’s Nevada LLC is illegally transacting business in California, he’ll need to register his Nevada LLC as a Foreign LLC in California.
This means he now:
- has 2 LLC filings to maintain (a Domestic Nevada LLC and a Foreign California LLC)
- has 2 state filing fees
- has to meet annual requirements and fees in both states
- may have increased Registered Agent fees
So in hopes of obtaining certain Nevada LLC benefits, Daniel has instead complicated the situation, increased his fees, and will most likely get no benefits from Nevada.
Even if Daniel has no employees in California, no office in California, and no clients in California, he is still running the business from his home in California.
Furthermore, California not only has strict corporate laws around doing business in the state, but they also have strict taxation laws around doing business in the state. This means that in addition to the LLC costs in Nevada and California, Daniel may receive fines and penalties from both the California Secretary of State and the California Franchise Tax Board. And he’ll end up paying California LLC annual fees and taxes anyway (which may have been the reason he considered a Nevada LLC in the first place).
Note: “Doing business” has more to do with where you are running and operating things from instead of where your clients and customers are located. A lot of our readers ask us if they have to register their LLC in every state where their customers are located. No, you don’t have to. You can just form your LLC from wherever you are running the business.
The court has discretion about the jurisdiction
If Daniel was looking to obtain certain legal benefits by having a Nevada LLC, those benefits may not apply in a court of law.
If Daniel’s LLC is involved in a lawsuit, the courts have discretion on which state laws apply. Since Daniel is doing business in California, it’s possible that the courts may decide that Nevada law doesn’t apply and that California law applies instead.
So the legal benefits of forming the LLC in Nevada are now useless.
Nevada LLCs are not as cheap as people think
Many websites only mention the Nevada LLC Articles of Organization fee of $75, but fail to disclose the full filing fee, which is $425.
The Nevada Governor approved Assembly Bill 123in 2017. This new change in the Nevada LLC law requires that all LLCs (except for those exempt from a state business license) must file an Initial List of Managers or Managing Members ($150) and a Nevada State Business License ($200) at the same time they file their Articles of Organization ($75).
Again, that’s a $425 Nevada LLC filing fee.
And if you need to hire a Nevada Registered Agent, that will increase your costs by another $100 to $200 per year.
Furthermore, the Nevada LLC Annual Fees are $350 per year. That’s $150 for an Annual List and $200 for the State Business License renewal.
Even worse, if you later realize that you need to register a Foreign LLC in your home state, now you have all these fees mentioned above ($425 to setup and $350 per year) in addition to the Foreign LLC fees in your state. Yikes! This can get expensive quickly.
And although the money may not be a huge deal for some people, the headache can be quite overwhelming for others.
We hear all kinds of horror/frustration stories about LLCs being set up in the wrong state.
We recently heard from a real estate developer, who after acquiring land and building a subdivision, realized they shouldn’t have formed their LLC in Nevada, wanted to move the LLC to their home state and then were pretty much “frozen” in a state of inaction when they realized how complex a conversion/redomestication filing was (moving an LLC from one state to another).
Not to mention, the need to close a bank account, open a new one, draft internal agreements, re-register their new LLC with vendors and suppliers, update the IRS, and more. The time and opportunity cost was well into the tens of thousands of dollars.
Nevada has no corporate taxes
A lot of people get really excited when they hear that “Nevada has no corporate income tax!”
Unless your LLC is taxed as a C-Corp, this won’t even apply. And this is the case for 99%+ of our readers.
Said another way, most LLCs don’t pay corporate taxes since LLCs are pass-through entities.
Meaning, in their default tax classification, LLCs don’t pay any corporate income taxes. The profits from the LLC “flow through” to the owner’s personal income tax return and are paid on the individual level (not the corporate level).
So that fact that Nevada doesn’t have state corporate income tax really doesn’t even matter.
Furthermore, you pay state income taxes where the money is made. Not where the LLC is formed.
Taxes are paid where the money is made
Even if there are applicable tax advantages in Nevada, this won’t apply if you’re doing business in your home state (or in another state).
State income taxes are paid where the money is made. So in Daniel’s case, he would get no tax advantages whatsoever by having an LLC in Nevada and instead, he’d be paying all his state income taxes in California.
What’s worse, is that the Nevada Department of Taxation may require an informational return to be filed. This means additional costs for Daniel’s accountant to file a “zeroed-out” return in Nevada and apportion the LLC’s earnings to California.
“My business is online with no physical presence”
Frankly, the state governments don’t care if your business is online or not.
The fact that you run your business from your home (which is located in a state) means you’re doing business in that state. Even if you work from a coffee shop, that coffee shop is also located in a state.
And that state wants to collect their tax revenue and enforce their LLC filing requirements for businesses illegally operating in the state.
Save yourself the money and the headache.
Just form your LLC in your home state or the state where you’re actually doing business.
Nevada Revised Statutes: Section 80.015
Nevada Revised Statutes: Section 80.055
Nevada Revised Statutes: Section 80.095
Nevada Revised Statutes: Section 76.020
Nevada Legislature: 2017 Assembly Bill 123
Nevada Secretary of State: Notice of 2017 Legislative Impacts
Nevada Legislature: Written testimony to the Senate Committee on Judiciary – Assembly Bill 123
NEVADA LLC GUIDE
Follow the lessons below to form your Nevada LLC.
43 comments on “Why You Shouldn’t Form an LLC in Nevada”
Disclaimer: Nothing on this page shall be interpreted as legal or tax advice. Rules and regulations vary by location. They also change over time and are specific to your situation. Furthermore, this comment section is provided so people can share their thoughts and experience. Please consult a licensed professional if you have legal or tax questions.
Thank you! Helped me dodge a bullet!
You’re very welcome Troy!
So this is my dilemma
I am start to rent out trailers, car trailers, to individuals through an app called outdoorsy. I formed an LLC to register the trailer under and to put the insurance under but my insurance agent said to register the trailer under my name and on the insurance it will be under my name with the LLC as additional insured. Would this still give me the LLC coverage I need? I am in Nevada and formed a NV Domestic LLC. I just bought trailer #1 but I have not registered it yet as I’m trying g to figure this out.
Hi Brie, we can’t say absolutely, as we don’t know the terms of the policy, but generally speaking, this is common. You could also speak with multiple insurance agencies if you’re adamant about the policies being directly in the LLC’s name. These are often called commercial policies and have slightly higher premiums.
I hope you are doing well. I run an online company in Massachusetts, where I live. I am set up as a single member LLC taxed as an S corp.
I am going to move to Nevada as it’s something I have always wanted to do and my business will have more connects out there and some other major benefits. What do you suggest I do with my LLC? Should I end the MA company, as I will have no business there anymore and will not have any inventory, employees or nexus there and start a new one in Nevada? Or should I do a domestication of the LLC from Mass to Nevada?
I have spoken with a tax lawyer who advised me of this, to kill the company in Mass and start a new company in Nevada with a new EIN, bank account, address etc. because Mass is notorious for sticking around even when I am done with them. It sounds like my options are to register in Nevada as a foreign entity, start a domestication to Nevada or start a new company and transfer all assets to the new company. Does this sound right? Would my credit card, connected to the old business EIN transfer as well?
Thanks Matt. I really appreciate your response whenever you have a moment and I love your website and all the information you have to offer. If you aren’t able to answer some of the questions no problem at all, just looking for a little guidance if possible.
Hi Fred, you are correct. Those are the 3 ways to “move” an LLC: 1.) dissolve and start new, 2.) foreign qualify, or 3.) domestication.
Dissolve and start new seems the simplest at first… and sometimes it can be, depending on the history of the business (ex: simplest for newer businesses with not a lot of activity who don’t care about retaining history). However, in your situation, no, the credit card doesn’t transfer. None of the business history, bank account, EIN, credit cards, S-Corp election, payroll account, etc. transfer. They all need to be started over.
Foreign qualification and domestication retain the company history, bank account, EIN, credit card, S-Corp election, payroll account, etc.
Foreign qualification is simpler initially as it’s an easier filing and less money than the fees for domestication (hiring an attorney, which we recommend since domestication is a more complicated filing). However, over time, it can feel more expensive, since you’re maintaining two LLC filings and keeping the LLC filings in compliance in Mass. and in Nevada.
Domestication is initially more expensive and complicated than foreign qualification, but over the long run, it will be cheaper (especially because the Massachusetts LLC Annual Report is $500 per year) because you’ll eventually dissolve the Mass. LLC after it’s properly domesticated into Nevada.
I know it’s a lot to digest. And I wish things were easier (especially since people are more mobile), but state laws will be like this for a long time to come. Food for thought: you can foreign qualify initially and then later choose whether to start a new LLC or domesticate. I hope that helps.
Thanks, an interesting overview. Twenty years ago I set up an LLC in my home state of FL, so I’m aware of at least past basic requirements. My concern is to protect my name and assets (e.g. home) with another layer that may provide some anonymity and protection. On a separate legal matter (which I lost despite having laws, covenants and facts on my side: also lost my faith in our legal system), there was a threat of seizure of assets (furnishings if not the actual house), which I don’t care to repeat.
Taking into account the additional expense, would opening a NV LLC, which in turn would be the owner of record of a FL LLC subsidiary, provide what I am seeking?
Hi Jim, I wish I could provide a simple answer, however, I recommend speaking with an asset protection attorney (or a few). Check out Alper Law. While yes, having your Florida LLC owned by another LLC (an LLC that has a private registration) will provide anonymity, it may not provide the asset protection you’re looking for, namely charging order protection.
For example, let’s say you form a Parent LLC in Wyoming (similar laws to Nevada but cheaper to set up, cheaper annual fees, and less paperwork) and that Wyoming LLC owns your Florida LLC. In the event you’re sued in Florida, the laws of Wyoming may not apply. You’ll specifically want to research and inquire into the laws of intangible personal property (in relation to the Parent LLC’s Operating Agreement). Meaning, as per Florida law, the LLC Operating Agreement for the Wyoming LLC will likely be deemed intangible personal property located in Florida. While you research the different entity setups, if you don’t already have personal umbrella insurance, that’s an easy win. You can contact your car insurance company and ask if they provide personal umbrella policies. For a few hundred dollars per year (to a couple thousand), you can get a $1M to $10M umbrella policy. Hope that helps. Feel free to share any of your findings if you’d like.
My friend, who is a resident of Texas, wants to start an online photography business. It would be selling different types of proprietary prints and would be received by the customer via download. I live in CA, but may do some consulting and even thought of helping him with some marketing. The only other persons involved would be possibly a piece work, independent contractor, recent college graduate, helping do some photoshop work. What entity and where would be best? I thought that a Texas LLC., but thats from limited research. Also, how is sales tax calculated and does he have to form a busiess entity in every state? Sales may also be international. Should he avoid that? How do all these online businesses do it? Any advice would be welcomed. Thank You.
Hi Ken, most companies work with a sales tax company, for example TaxJar, and/or an accountant. And no, the LLC doesn’t need to be registered as a foreign LLC in the states where it collects and remits sales tax. I wouldn’t eliminate international sales. Please check with an accountant, but there is likely no sales tax to collect on that. Regarding the entity, most small business owners do form an LLC (as opposed to a Corporation). We have more information here: LLC vs Sole Proprietorship vs Corporation. And because the business is being conducted from Texas, forming a Texas LLC is likely the best route to go. If your friend formed an LLC in another state, it would need to be registered as a foreign LLC in Texas because that’s where the LLC is “doing business”. Hope that helps.
Hi Matt. So I want to form an LLC. I live and file taxes in Nevada but I also am in California every month because I still have a mailbox there and for medical reasons. I would like to know which state should I register in? Im thinking California might still consider me a resident so that’s why I ask.
Hi Traci, what kind of business will this be? Will you be doing any work for your business while in California?
Just some consulting work. All of my business will not be in California. Some of it will be online or over the phone for right now.
Hi Traci, we recommend reading when is an LLC doing business in California. As it sounds, regardless of where you form the LLC, the LLC will likely be doing business in both California and Nevada. So if you formed the LLC in California, it would need to be registered as a foreign LLC in Nevada (and vice versa). Hope that helps.
Hope this message finds you well, i was wondering if you could give me some advice. I have small business i just did an llc for here in CA. But i want to also have a skin care line with the same name but adding skin care after it as a sub brand? However my business partner lives in NV and i live in CA, how do we go about that? thank you so much!
Hi Ada, “sub brand” isn’t an official term, so I’m not sure what you mean by that. Do you want the LLC used for the skincare business to be legally separate and apart from your current California LLC? If so, it sounds like you may want to form a new LLC. If the LLC is formed in Nevada, it will need to be registered as a foreign LLC in California. The inverse is also true: If the LLC is formed in California, it will need to be registered as a foreign LLC in Nevada. Hope that helps.
Thanks for the reply! Yeah i have a business now and its mostly my art, but we want to use the same name just add skincare to it. Do you still recommend adding a whole new llc? What about using it as a fictitious name? and you’re saying it doesn’t matter where the partner lives right?
You’re welcome Ada. You don’t have to form a new LLC. You could file a DBA for the skincare business activities. You can also add your partner to the California LLC. However, it’s a bit involved and the state doesn’t provide forms. Adding or removing Members is an “internal” process. What will you partner be doing in Nevada? There is a good chance the California LLC will need to be registered to do business in Nevada as a foreign LLC. I can provide the steps for adding the Member in my next reply if you’d like.
Hi Matt, thanks so much for the informative article. I think my case might be different, though, and that a Nevada LLC, in fact, IS the answer for me. Do you mind checking my reasoning here? :-)
I am a US citizen although I have lived abroad for several years. My driver’s license is in New Mexico (since my parents live there). I run a business that is 100% online and it’s currently registered as an LLC in New Mexico. However, it’s a service-based business and NM charges a 5% sales tax on services. So we’re thinking about moving the business and re-registering it in a state like Nevada, which has no sales tax on services.
According to what I have read, I wouldn’t need to file a Nevada LLC with the state of NM as a “foreign LLC” either. So no issue there.
So am I wrong in thinking that, in my case, having a Nevada LLC would indeed be a GOOD option? I don’t see any downsides besides the $350 annual fee — only upsides to not having to pay the massive NM sales tax. Or am I missing something?
Would love to hear your thoughts on my case if you have a moment. Thanks again, and I’ll be happy to share the word about your website to others.
Hi Diego, you’re very welcome. Something like this is too large to unpack here and there are a number of details to sort through. It’s best to speak with an accountant to strategize around sales tax. Thank you for your understanding.
I am interested to do business in U.S and thinking which State can be more suitable for Foreigner(non-US resident). Can anyone give me some advice please? Appreciate for your kind answer.
Hi Salai, there isn’t a general “best state” for non-US residents. However, if the LLC won’t be transacting business in a particular state, then you can pick any state you’d like. We have more information for non-US residents here:
Get an EIN for LLC without SSN
Non-US Resident can open US LLC bank account
Form 5472 for foreign-owned Single-Member LLC
I live in NV. I am publishing a cookbook. I want an LLC and a DBA. I can’t the LLC to own the DBA
Hi Jacqueline, can you please rephrase your question? Thank you.
Hi Matt, I’m starting my own business in the beauty industry and someone like myself starting off what would you recommend to get? LLC or sole proprietorship? My physical address is in the state of NV.
Hey Jennifer, we actually don’t recommend operating as a Sole Proprietorship because there is no liability protection. We made a video on this here: LLC vs Sole Proprietorship. Hope that helps!
Hi Matt, my wife and I are considering forming a LLC as real estate Investors ln NV. We reside in VA, with properties in GA and VA to date. Where should we create the LLC?
Hi Andrew, there are multiple ways to structure things in this scenario. We recommend speaking with an asset protection attorney and/or a real estate attorney. The LLCs that own the property need to be formed (or registered as foreign LLCs) in the states where they are transacting business. You could form 1 LLC in one state and register that LLC it in all states it’s doing business. You could also form an LLC in one state that owns all the other LLCs, that in turn, own the properties. Those are a couple of examples where you’ll want to dig into all the details about the pros and cons. Hope that helps.
Hi Matt, I’m following this path of you mention here of having an LLC (does the state matter?) that holds my leaf LLCs that hold my property. I’ve property in both Virginia, North Carolina and the Virgin Islands. So I’m considering a Nevada LLC as the umbrella that holds as members the separate NC, VA, VI LLCs for those properties. So in those cases do I set the “leaf” LLCs up as owned by the Umbrella? I would guess I put in place the Umbrella LLC first and then do the leaves in each state? Am I thinking correctly in mind and process? Does the Nevada LLC as the umbrella add value or is it just an extra hassle and I should do do an umbrella in the state with the most properties? To me I’d make a trip to Nevada every year if needed and could create some nominal holdings there if that made the difference.
Your thoughts on the above appreciated … thanks, Chris
Hi Chris, yes, you’re thinking is correct. If you have a holding company (aka parent LLC), that LLC would be formed first. Then the subsidiary LLCs (aka child LLCs) would be set up afterwards. Where the parent LLC is formed doesn’t have to do with where real estate holdings are, since the parent LLC doesn’t own property directly. The holding company can technically be formed in any state, however, there could be extra asset protection depending on how many owners there are and in what state the LLC is formed (for charging order protection). In what state do you reside?
If I start a business in NV and manufacture products that are now bought and resold by a company in California how does that affect the situation?
Hi Scott, where an LLC is transacting business (and therefore should be formed or registered as a foreign LLC) has more to do with where you running the business from and carrying out activities from than where your customers are located. So if you are running things and operating from Nevada, you can just form an LLC in Nevada. Hope that helps.
I am started my online business and not sure how or when to create my LLC. I am a Nevada resident and we own a home and pay taxes there, but currently living in another country. Is it in my best interest to create an LLC for Nevada even though I am not currently living there? How long should I wait for before filing for an LLC, I only made 1,000 dollars last year; I only started launching my services towards the end of the year.
Also, there is a chance I might not be moving back to Nevada and move to another state.
Curious to know your thoughts!
Hi Kim, I’d say it’s also important to consider liability as a more important factor than how much money you’re making. Meaning, do you think the business activities could expose you to potential liability? If so, an LLC will offer far more protection than a Sole Proprietorship. Approximately when do you think you may move to a new state? And do you have a state in mind, or are there multiple you are considering?
I offer fitness coaching online. The best option would be LLC to keep it separate.
Until I get my business going I thought it would be best to hold off on making it an LLC.
My husband and I file our taxes together and we live off his income. We pay taxes in Nevada and in Chile. I currently do not have a job. When I am filing my taxes can I file as an independent contractor with the 1099 form? That why I asked if you know how much money my “company” needs to be profiting before I make it an LLC. All my business in done Online and I have clients all of the world at the moment.
His company has not told us where we are moving next.
Thank you for your help
Hi Kim, I see. That makes sense why you asked. Will you be the only LLC Member (owner) of the LLC or will you and your husband own the LLC together? There are a few different ways your LLC can be taxed, but in either setup, your LLC will not issue a 1099 to yourself. You are simply an owner of the LLC, not an Independent Contractor who works for your LLC. Most likely (depending on how your LLC is taxed) you will report the income, expenses, deductions, and credits of your LLC on your personal tax return. If you own the LLC by yourself, the LLC will be taxed like a Sole Proprietorship. If you own a Nevada LLC with your husband, you stay in Nevada, and you file taxes jointly, your LLC can be taxed as a Qualified Joint Venture LLC. If you and your husband own the LLC in a non-community property state, your LLC will be taxed as a Partnership. For more information, please see how are LLCs taxed.
I live in Nevada, Made a mistake on formation. Friends said it was easy. I accidentally checked the RESTRICTED Domestic Liability box and found out from my Chase banker that I couldn’t take any money out of it for 10 years. It cost $175 to fix it. The hold time is over an hour on the phone. I was upset about the cost to fix it. Considered getting a separate d/b/a sole proprietor instead. But, sometimes we make mistakes and we just have to live with it. My recommendation is a d/b/a Sole with good business insurance and separate bank account until the company grows. Then get a lawyer to handle it.
Oh wow, what a headache. Glad you caught it early on. We do discuss not to check this box in our Nevada LLC Articles of Organization instructions. It sounds like you filed a Certificate of Amendment to Articles of Organization ($175) and corrected your Articles of Organization. While one can change from Sole Proprietorship to an LLC, it’s less of an administrative headache to just start with an LLC (if that is one’s plan). Glad you got things sorted out. Thanks for your comment.
Matt I live 12 miles over the border from Nevada up north in CA. I want to do my business in Nevada. If I get an address, PO box and file for a foreign LLC will that eliminate from the CA taxes?? If not would getting a Nevada drivers licensee do the trick??
Thanks and best regards,
It’s very interesting that the states that you gave an example of are California and Nevada. Cause this is my current dilemma…
I was born in California (lived there til 5 yrs old) but lived 40 more yrs in Las Vegas. Well I recently (it’s been 1 yr) moved back to California.
I have determined that I am gonna start a non-emergency medical transportation company (taking clients to dialysis and doctor’s appointments and such). I have been advised that I might wanna start with forming an LLC first. Where my dilemma comes in is where do I wanna start this company? Every time someone asks me, “where are you gonna do your company at” my answer is, “here in California to start, with future plans to do business out of Nevada as well!” Eventually relocating back to Nevada because reality has set in of just how expensive it is to live in California. LOL. So the sequence goes, California business (living here) > Nevada business (move back there) > California/Nevada business (with Nevada as my residence, commute to California as need be for the business). This is my honest plans and have ABSOLUTELY NOTHING to do with trying to skirt around state taxes, yada, yada…Honestly, I’m not astute enough to know what is best when it comes to avoiding taxes, etc…anyhow! Although, I’d be lying if I said that I haven’t heard from a handful of people that the best thing to do is to start my business in Nevada then bring it to California “doing business” out of there.
Sorry if I got long-winded, but just need some advice on if this is a round about way to achieve my goals of doing the business out of both states? Should I consider doing it out of Nevada first even if I’m living in California yet my long term goals are to move back to Las Vegas? Which is cheapest to start as it concerns the LLC and such? But most importantly, from a business standpoint, which would you say is best long term when it comes to business, tax purposes, etc…? Thanks in advance for your time Matt!
Hi Chris, it sounds like you’ll be doing business in both states. In that case, you’d form an LLC in one state and register it to do business (as a Foreign LLC) in the other state. In your personal state income returns, you’d be filing in both states, and your accountant would apportion your income between the two states, depending on how much is earned in each state.
Which state you choose as the domestic LLC state (where the LLC is formed) won’t impact your LLC fees or personal taxes. It would end up being the same (having said that, we recommend you double-check with a tax professional). Reason why, is both domestic and foreign LLCs (in both CA and NV) still have to meet the state filing requirements.
If it helps, it could be easier to think of your domestic LLC as the “base” LLC. And if NV is where you’ll ultimately reside, you could form a Nevada LLC now and register it to do business in California as a Foreign LLC. And if in the future, you stop doing business in California, you could withdrawal the California Foreign LLC registration and you’d be left with your domestic LLC in Nevada. Hope that helps!
This ABSOLUTELY DOES help! Thanks a million Matt!
You’re very welcome Chris!