Nevada Has No Corporate Taxes, Right?

  • April 15, 2015

Nevada has no corporate taxes, right?

It is true that Nevada does not impose corporate income taxes.  This, and the fact that Nevada also does not impose personal income tax, makes it a very business friendly state.  However, this does not mean that you can escape taxation simply by forming a corporation or limited liability company in Nevada.  First, regardless of where you incorporate, the Fed’s are always entitled to a piece of the action, whether that is recovered through corporate taxes or personal taxes.  Second, if you are doing business in another state, you may be required to register to do business in that state, which may mean paying annual registration fees as well as state corporate income taxes or other taxes imposed by that state.  Third, if you are not a resident of Nevada, you may be obligated to pay state personal income tax in whichever state you do reside.

So what constitutes “doing business” in another state?  Here is a lawyer answer for you – it depends.  Every state has a different statutory definition of what constitutes doing business in that state.  It is fairly safe to say that if you repeatedly conduct activities in a state, like shipping goods from a warehouse or having salespeople visiting customers on a regular basis, that is likely to be considered “doing business” in that state.  This may mean that you need to register your business to do business in that state.

While Nevada is one of the most business friendly states around, which is one of the many reasons we love our beautiful Silver State, forming an LLC or corporation here, if you are not actually conducting business in our fair state, is not necessarily going to help you avoid taxes in another state.  The solution of course is for you to bring your business to Nevada.  We would welcome you with open arms.  But short of that, you should consult with an attorney and/or CPA before electing the state in which you incorporate your business.

welcome-to-nevada-sign

Update: The Not So Superpriority Lien?

  • April 6, 2015

Update on the SFR Case:  The Not So Superpriority Lien?

As discussed in a prior blog post, in September, 2014, the Nevada Supreme Court issued a ruling in SFR Investments Pool 1 v. us Bank, 130 Nev. Adv. Op. 75 (9/19/14) that held that a foreclosure sale by an HOA for unpaid assessments will wipe out a lender’s interest as a junior lien.  This has made purchasing HOA foreclosures a very attractive investment option.

But as is often the case, when things seem too good to be true, they often are.  A slew of cases have hit the Federal District Courts in Nevada which may call into question the SFR ruling if the wiped out mortgage loan was a Freddie Mac or Fannie Mae backed loan.

In September of 2008, the Feds placed the very troubled Freddie Mac and Fannie Mae into a conservatorship (under the conservatorship of the Federal Housing Finance Agency “FHFA”) for the purpose of reorganizing and rehabilitating Freddie and Fannie.  Congress granted FHFA, via Federal statutes, broad privileges and exemptions to carry out its duties as the Conservator.  These exemptions included statutory protections that provide that “[n]o property of the Agency shall be subject to levy, attachment, garnishment, foreclosure, or sale without the consent of the Agency, nor shall any involuntary lien attach to the property of the Agency.” 12 U.S.C. § 4617(j)(3).

While no decisions have been issued as of yet, it is possible that the Federal Courts could rule that HOA foreclosure sales are invalid as against Fannie Mae and Freddie Mac backed loans.  If this is the case, then an HOA foreclosure would not wipe out a first position mortgage holder, if that loan was backed by Freddie or Fannie.  We may not know the answer for some time, but meanwhile, buyer beware!