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Dual Corporation Strategies

State Tax Savings and Asset Protection

If you do business in a high business tax state, you have probably looked with envy at the low tax rates in Nevada. There are legal methods that you can leverage a Nevada corporation that does business with your "home state" corporation.

For example, let's say you are a building contractor in California. You have set up a California corporation several years ago, and pay state income tax on the profits of that business. Your next step will be to set up a Nevada corporation. The Nevada corporation will do business with the California corporation. The two businesses will have the same total income for U.S. tax purposes, so there will be no impact on U.S. income taxes. In fact, depending on how it is set up, you may need to consolidate the two corporations for your Federal income taxes.

The Nevada corporation will make loans to the the California corporation for its business needs. The loans will have a market interest rate and require regular payments. For the loans, the California corporation (and you) will provide UCC-1's on your business and personal assets. This provides the Nevada corporation the security it needs for the loans (collateral) -- just like a normal bank loan. A great benefit to this strategy is asset protection in the case of a lawsuit. Since the Nevada corporation has encumbered (liened) all of your business and personal assets in California, you have become much less attractive for a potential lawsuit.

You should contact a number of business lenders for the appropriate interest rate on this type of loan. The survey that you take should be documented and be based on the current business credit condition of your California corporation. Any interest paid by the California corporation will become a deduction in California and income in Nevada. Again, it is critical that the loan be documented, have payments, and have a market interest rate.

The benefits of this strategy are a great deal of asset protection for your home state corporation, and potential tax savings depending on where you do business. Any of the incorporation provider links on this page in the green box can provide you with full detail and personal consulting on this #1 Nevada incorporation strategy.

This information site does not provide legal or accounting advice. For legal or accounting advice, please consult a professional such as a Certified Public Accountant or Attorney.


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