Nevada C Corp & LLC & Land Trust

[jagsterr]

I just talked to a company that sets up NV corporations.  They said the perfect set up would be a parent company with LLC, and you have 1%, a C Corp which is 99% partner and the Trustee.  Then a separate Land Trust for each property you acquire.

This creates asset protection and you get tax benefits, plus you don't have to worry about doing 1031's anymore.

Does anyone agree with this?

Thank you, Jag

[mcwagner]

sure, that's the "perfect" setup.

They didn't tell you that you can't open a local bank account unless you're registered as a foreign entity in your home state, which bypasses all the privacy and tax benefits of NV, and that your tax returns are going to cost you another $1,500 a year because of all the intra-company transactions and that you're also going to have to pay a NV registered agent service every year.  They did probably mention that for the bargain price of $5,000 they'll take care of all those  "services" for you.  

Get an LLC in your home state.  It offers 95% of the protection you describe, at much lower cost and hassle.  You shouldn't have to pay more than $200-$300 (plus state fees) for this service.

not worry about 1031?  your entity choice has NOTHING to do with deferring gain with a 1031.  give me a break.  charlatans.

[Redwing384]

why would you need a local bank account in your home state?

there are plenty of banks in NV.  You can bank online.  

To clarify mcwagners point... you cannot achieve privacy and the tax benefits of a NV corp if you use one NV corp.  The tax benefits come from the income-shifting to a NV S-corp (which you have to disclose the shareholders-thus losing privacy but retaining tax benefits).

you only get the Privacy you are looking for in a NV C-corp with the nominee director/officer and non issuance of stock shares, or if you If you must issue stock shares, then you would issue the "bearer share"

as for the extra $1500 for tax prep that mcwagner talks about, I think he is way off base.  It does not cost that much.  There are plenty of reputable CPA's that will accommodate your tax concerns.  That might be what he would charge but you can do better than that.  Even if you paid that amount, it is still a fraction of what you would save utilizing the proper NV tax strategies that any CPA in NV would recommend.  Even though mcwagner has a legitimate point, you should speak with a CPA knowledgeable with NV law.

NV corporate law does require a registered agent if you do not have a local address in NV.  The registered agent will cost you about $85-$99 for the year. This should not break your bank like he suggests.  

As for the inference to $5000 for "services" - there are many companies in NV that try to sell you all the bells and whistles and they will tell you stories about how you "NEED" these services in order to keep your company in good standing.  The bottom line is that in NV, the only requirement to keep your company in good standing is that you file the required list of officers/directors every year.  That costs $125.  That should not break your bank either.

as for the LLC in your home state... what benefit will you have if you invest in property outside your home state?  you will still have to register that LLC as a foreign entity in the state that you hold the property in.  

[mcwagner]

any beneficiary percentage less than 10% will invalidate the trust (IRS).

[BillGatten]

Mcwagner,

Honestly this is not my site and I have no business trying to correct or cajole the rough-riders here.  But I've noticed several glaring errors in many of your posts.  The only ones I will mention here are your statements-- 1) that less than a 10% interest in a trust invalidates it.  That simply is not so.  And 2) that there is somehow a hassle with opening a bank account for an LLC in Nevada.

In a land trust you can have 1/2 of a percent interest if you want to.  You can have three beneficiaries with 20% each and forty with 1% each if you want to.  I think what you are alluding to is the percentage that an individual has to hold if he/she is claiming an income tax write-off for the operationof the trust...then the 10% does come in to play.  With less than ten percent ownership you are just a speculator, not an owner in the eyes of the IRS (and this pertains to partnership, corportions, associations, amalgamations, and any other business structue wherein ownership is fractional).

Re. the Nevada LLC issue, please!  I have some fifty LLC's in Nevada and a couple in Delaware and one in Wyoming.  I have no trouble what-so-ever in opening a bank account in Nevada, and my income tax preparation bill is no higher than it would be otherwise.   My registered agent costs me $134 per-year and every LLC I set up costs me $198.00 for the whole enchilada.

Please know that your answers to these kinds of serious questions are undoubtedly appreicated by the posters here, but they truly do require serious thought and a good degree of knowledge to avoid the potential for really hurtring someone.

Bill Gatten

[niravmd]

Bill

the RA's are ripping you off. I'm paying $89/yr!!!!

and i opened an account in another state for my NV LLC and c corps with no problems at all.

[Redwing384]

Bill and Niravmd,

my question is ... what benefit are you getting by having a Nevada LLC if you own property in  states other than Nevada?

What exactly are you trying to accomplish????

[kdhastedt]

Just when you thought it was safe to go back in the water, "Mtn Wizard II - The Return of NARS Swiss Army Knife Trust"....!

[mcwagner]

I'm glad NV is working well for you.  You are obviously an experienced investor.  However, your needs and skills are different than for beginning investors.

My intent was to point out that the Nevada packages that are often sold are not the "end all and be all" of entity establishment, and that there are often significant issues that they conveniently leave out of their sales pitch.  While these omissions may be of no consequence to you, for unskilled investors they can make the difference between easily getting started in a 2nd career or leaving the game frustrated and broke.

There are easier, cheaper and better ways to get started.

In that light, my previous post was, and still is, right on the money.

In my professional opinion, the cost and hassle of a series of NV entities does not offer significant additional benefits to outweigh those costs for new investors.

[jagsterr]

Well it looks like this topic I posted is going in several different directions.  (1) Creating a NV LLC is suppose to give one veil protection against predatory attorneys, and (2) is suppose to eliminate state taxes or capital gain, so there will be no need for a 1031 - a big concern for many.

Now if you are going to have a CA foreign status, not a problem.  Just get your agent for service of process in NY (easy to find), and open a NV bank account - (easy, can be done on the phone).  That company will give you an address that you can use, they can forward your mail to you in your state, and they can hold annual meetings with you so that you can have them prepare the Minutes each year for filing.  Sounds like a good deal.

Does anyone know if this can also be done in AZ as it is also a no income tax state.  Any drawback with AZ that you know of?

[mcwagner]

State tax laws will not eliminate capital gain on your federal taxes.  no way no how.

[Redwing384]

jagsterr,

I am assuming that you are using a Nevada LLC for real estate holdings because of your reference to 1031's.  If that is the case:

1)  a Nevada LLC will give you NO more protection than an LLC in the state your property is located in.

2)  if you make revenue in CA, you will pay taxes in CA.  Just because you have an LLC in Nevada does not eliminate your responsibility to pay tax on income generated in CA.  You need to implent an income shifting strategy to take advantage of the tax benefits NV can offer.

3)  wouldn't it be easier to have a CA LLC (if that is where your property is) and shift/stratify the income from that LLC to a Nevada corp through a management agreement?

4)  Nevada does not require you to have an address in NV to recieve your MAIL at.  If you are paying for forwarding service, it is unnecessary, but there is nothing wrong with that concept.  It does however require that if you do not have a local address to serve process, you must retain a registered agent in NV.

5)  Nevada does not require you to file minutes with the state annually.  It only requires you to file a list of officers/directors annually.  The fee for that is $125.  Now your Nevada Corp is in good standing with the state!

6)  don't know about AZ,  but you can shift income from any state to a NV corp and minimze your taxable liability.  You would want to speak with a CPA who knows Nevada.

good luck!

[mcwagner]

Addendum to #2.

If you live in CA, you pay tax on income generated EVERYWHERE.

That's why you would need to establish an LLC out of state, and tax it in a manner that does not pass-through income to your personal return (ie: C-Corp).

[jagsterr]

This is so confusing because each professional, CPA, tax attorney, real estate guru, all say something different.

I am a realtor and earn my commissions in CA.  I have income property in AZ.  Have a CA C-Corp for the realtor bus, and a CA LLC for the AZ property.  

I was told to stop the CA LLC, and create an AZ LLC.  Since I make my rental income in AZ, file my return there and then I won't have to pay the CA state tax.  This would save me $800 of the bat.  

My tax attorney who owns in other states does this.  I'm so confused!  

[mcwagner]

AZ LLC taxed as a C-corp so that the income does not flow thru to your personal return will avoid both the CA fran tax as well as CA income tax, as long as the LLC does not establish nexus in CA.  

Nexus will attach when you 1) open a CA bank account, 2) establish an "office" in CA [ie: use a CA address as a business address] 3)engage in any transaction that is reportable to CA gov't [such as filing any deeds, liens, etc in CA].  

If you choose to tax your LLC as any of the pass-thru entities, you will still avoid CA fran tax, but will still pay CA income tax through your CA personal return.