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Incorporating in Nevada to avoid franchise tax?

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  • Incorporating in Nevada to avoid franchise tax?

    I know that state income tax is based on where I live and where I work. I'm a locums physician, I don't have an office. I live in a state with high franchise (corporate minimum tax) and payroll tax (unemployment, disability, family leave). I've worked in two other states this year. I'm currently incorporated in my home state. But since I don't have a office here nor have I done any work in this state, would it make sense for me to incorporate in Nevada? If so, what costs will I save, if any? Franchise tax?

    And what about unemployment/disability, are they based on where I live, where I work, or where I am incorporated?

    I believe that payroll taxes are based on where I work, right?

    So I think the only benefit of Nevada would be avoiding the home franchise tax where I live?

  • #2
    One more question-

    If you are a locums LLC/scorp, do you have to issue a W-2 to yourself for EACH state that you work in? If I did a two week stint in Kentucky, I would need to run payroll as a Kentucky employee, right? In order to do that, I would also have to register my business in the state of KY, per Gusto payroll service.

    This doesn't seem right to me, because as a locums doc, I'm sure there are those who work in like 5-10 or more states, and if you are an LLC/Scorp, that means you have to register and file annual reports, pay fees as a business in all of those states.

    Or do you just run payroll through the home state of the business?

    Thanks

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    • #3
      Major league baseball players and the physicians that worked in NYC had to pay state and local taxes for work done in NYC. I think you are on the hook for money earned at a location. I think you know the answer, a company needs to register in the state to do business. This doesn't seem right to you but it seems right to the state and local officials. It is more than the w-2's. you will have tax returns to file as well. It gets messy because the apportionment for each state is different.

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      • #4
        Yes, are are responsible for any required taxes in states in which you have “nexus”. This is subject to state law and your CPA should help you determine what filing requirements you have. As Tim mentioned, “apportionment” varies per state, so it’s pretty complicated. For example, KY requires filing an LLET (Limited Liability Entity Tax) return plus local taxes depending upon where the hospital that you are working is located. Unless you are making at least $400k income (after expenses), I really wouldn’t recommend an S-corp and especially not an LLC for multi-state locums work - and especially not if you live in California, if that is the state you are referring to.
        Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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        • #5
          Thanks for the replies!

          I don't live in California but my state does impose a $750 minimum business tax based on my earnings. But my question is, can I just incorporate in NV or another state with no scorp tax? Given that I don't have a presence nor do I practice in my home state?

          And yes I am responsible for the taxes in each state as well as tax filing requirement, so this may be a dumb question but I am trying to understand if that means that I am also responsible to register my business in each state, file annual reports, pay the fees, etc in order to do locums in that state through my business?

          Because in that case I will dissolve my LLC lol.

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          • #6
            Originally posted by Screwdriver View Post
            Thanks for the replies!

            I don't live in California but my state does impose a $750 minimum business tax based on my earnings. But my question is, can I just incorporate in NV or another state with no scorp tax? Given that I don't have a presence nor do I practice in my home state?

            And yes I am responsible for the taxes in each state as well as tax filing requirement, so this may be a dumb question but I am trying to understand if that means that I am also responsible to register my business in each state, file annual reports, pay the fees, etc in order to do locums in that state through my business?

            Because in that case I will dissolve my LLC lol.
            Sorry I wasn’t clear but yes, you are required to register in each state in which you do business and pay any applicable taxes, fees, etc. unless you are working in a state that doesn’t require you to. All states have their own take on this, but can’t think of one off-hand that d/n expect you to register. Again, don’t forget local taxes (no way you can get around this as a sole proprietor, either). KY localities have been especially vicious at going after locums doctors for back taxes on unreported income. The state SOL is 4 yrs, each locality could potentially have its own.

            States are losing a lot of tax revenue as more people are telecommuting, buying online, etc. Don’t expect it to get better anytime soon as they continue to compete for your tax dollars.
            Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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            • #7
              Originally posted by jfoxcpacfp View Post

              Sorry I wasn’t clear but yes, you are required to register in each state in which you do business and pay any applicable taxes, fees, etc. unless you are working in a state that doesn’t require you to. All states have their own take on this, but can’t think of one off-hand that d/n expect you to register. Again, don’t forget local taxes (no way you can get around this as a sole proprietor, either). KY localities have been especially vicious at going after locums doctors for back taxes on unreported income. The state SOL is 4 yrs, each locality could potentially have its own.

              States are losing a lot of tax revenue as more people are telecommuting, buying online, etc. Don’t expect it to get better anytime soon as they continue to compete for your tax dollars.
              It's ok! Thank you for answering. And regards to my first question about registering in a fee-free state like NV, makes sense or will it just add to the complication?

              You're very helpful, thanks again.

              Comment


              • #8
                Nevada would likely just add a state. Where you reside would have it's own tax filing requirements. You might be exempt is you earned no income in the state. However, things like interest and investment income might be taxable. Because you live in the state, you would need to find out your home state requirements. Where you live is why many people move in retirement, no earned income but still a tax burden.

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                • #9
                  Originally posted by Screwdriver View Post

                  It's ok! Thank you for answering. And regards to my first question about registering in a fee-free state like NV, makes sense or will it just add to the complication?

                  You're very helpful, thanks again.
                  You owe the taxes where you owe the taxes. Incorporating in Nevada (or Delaware, or Wyoming, etc.) is unlikely to help you escape legitimate taxes owed.

                  Comment


                  • #10
                    Originally posted by Hank View Post

                    You owe the taxes where you owe the taxes. Incorporating in Nevada (or Delaware, or Wyoming, etc.) is unlikely to help you escape legitimate taxes owed.
                    Every state has different business taxes. Nevada, from my understanding, has zero minimum s-corp tax. So if incorporating there, I would owe zero in Nevada, is my thoughts. But it's too complicated so I wanted to verify.

                    . Where you reside would have it's own tax filing requirements. You might be exempt is you earned no income in the state. However, things like interest and investment income might be taxable. Because you live in the state, you would need to find out your home state requirements. Where you live is why many people move in retirement, no earned income but still a tax burden.
                    I think you may be talking about personal income tax, which yes, I would owe in my state of residency on the full income amount.

                    My concern has to do with business (franchise) and payroll taxes.

                    Comment


                    • #11
                      Originally posted by Screwdriver View Post

                      It's ok! Thank you for answering. And regards to my first question about registering in a fee-free state like NV, makes sense or will it just add to the complication?

                      You're very helpful, thanks again.
                      Impo, it will simply add to the complication.
                      Our passion is protecting clients and others from predatory and ignorant advisors. Fox & Co CPAs, Fox & Co Wealth Mgmt. 270-247-6087

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