The tax burden facing small business owners continues to grow every year, even in Nevada. If you run a Nevada Corporation or Limited Liability Company, be prepared to get your corporate checkbook out. On July 1st, all initial and annual fees for Corporations are going to double from $325 to a whopping $650 (per year)! LLCs will experience a smaller hit, going from $325 to $350 per year.
At one time, Nevada was called the “New Delaware” and quickly became the prominent state for corporate filings, charging reasonable up-front fees ($75 filing + $125 initial list) and flat annual fee ($125). Smallbiz owners, trying to avoid high fee states like California, Illinois, New York, and others, flocked to Nevada. This changed over three years ago, when annual fees effectively increased to $325, when the state required business license registration for all entities, including those that had no intention of operating their businesses inside Nevada. Because this fee increase occurred during a recession, it was difficult to see the impact of the change on the number of Nevada corporate filings or corporate migration from Nevada. As the economy improved, so did the number of filings.
Last Friday the Nevada Secretary of State announced that the Initial List filing fee (due on the last day of the next month after a new filing) and the Annual List filing fee (due on the last day of the anniversary month of a filing) have been raised to $650 for Corporations. So, if you file a new INC, your initial state fees will be $725 and every year, your Corporation will pay $650. This will undoubtedly be the cause of a mass migration of corporations from the state and a drop in corporate filings by entrepreneurs who realize there are many other choices outside of Nevada.
LLCs were spared some of the pain, as their initial and annual list fees increased by only $25 to $150 and the business license remained the same at $200. So, the net annual (and list) fee is $350, which was still an 8% increase. And yet, it's still high when you consider other states are as low as $25 per year.
For those of you who were thinking, “Whew, I’m glad I filed earlier,” you’re out of luck too. Unless your list is due now through the end of August of this year, AND you pay BEFORE July 1st 2015, you will be paying the higher fees. In other words, you will not be grandfathered. So, if you owe an initial or annual list fee of $325, but you pay after July 1st, you will pay the higher $650 for Corporations and $350 for LLCs.
If your entity is in “Default” or “Revoked” status and you reinstate before July 1st, you’ll pay the old fees. But, if you reinstate ON OR AFTER July 1st, you will pay the higher fees. For example, if your Corporation is Revoked and it overdue for three years annual list fees, the cost to reinstate your Nevada Corporation would be $2875 ($825 per year—including late fees—plus $400 reinstatement fee).
If you have a Nevada INC or LLC and you have an upcoming initial list or annual list due by August 31st, you can pay this early (before July 1st) and lock in the lower fees, for this year. Unfortunately, if your list is due on or after September 30th, you are not allowed to file your list before July 1st.
Of course, Nevada is not the only option out there, even if your INC or LLC is already registered there. You can actually move your charter from NV to one of several states. For instance, you might consider moving your Nevada INC or LLC to Wyoming, which charges only $50 per year for their annual fee. You can move to Wyoming and realize net savings the first year and $600 per year after this, and you’ll keep your Corporation’s original date of formation, retain your entity's same EIN, and contracts with vendors and partners. The savings are a little less for LLCs, only because the fees are less, but still $300 per year is nothing to sneeze at.
Nevada has proven that they view Corporations and Limited Liability Companies as their own slot machines who exist to fund their government coffers. But, we have to realize as entrepreneurs that we have choices. We can choose to abandon a state that has abandoned us--I include California and now Nevada--and move our Corporations and LLCs to a state that is business-centric.
It's time for you to make a choice, but make it quick.