Nevada Corporations
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Information on this site is not intended as and shall not be construed to be LEGAL ADVICE.
When dealing with legal matters, you should always avail yourself of the services of a qualified member of the Bar Association.

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Asset Protection Flash presentation

Not "Doing Business" in Another Jurisdiction

Since most people who form Nevada corporations reside in jurisdictions other than Nevada, one of the first questions that needs to be addressed is how to properly use the corporation while they themselves operate from within their home state (or country). Is it necessary to register or qualify the Nevada corporation to do business within their jurisdiction? Often it is-especially if there is a physical presence involving employees-but there are many useful exceptions to the rule and you just might want to check them out to see where you fit.

Let's look at the exemptions from qualification in the State of California-which is generally known for both its stringent regulations and its repressive taxation-to see what "loopholes" exist. You should look up the regulations in your own particular jurisdiction but as a general rule they will tend to be quite similar.

Business Exempt from Qualification in the State of California

Without excluding other activities which may constitute transacting business, a foreign corporation shall not be considered to be transacting business solely by reason of carrying on any one or more of the following activities:

1. A foreign corporation shall not be considered to be transacting intrastate business merely because its subsidiary transacts intrastate business.
2. Maintaining or defending any action or suit or administrative action.
3. Holding meetings of its board or shareholders or carrying out other activities concerning its internal affairs.
4. Maintaining bank accounts.
5. Maintaining offices or agencies for the transfer, exchange or registration of its securities.
6. Effecting sales through independent contractors.
7. Soliciting or procuring orders either by mail or through employees or agents or otherwise where such orders require acceptance without this state before becoming binding contracts.
8. Creating evidences of debt or mortgages on real property.
9. Conducting an isolated transaction within a period of 180 days and not in the course of a number of repeated transactions of like nature.

We have highlighted number 6 because this provision is used by an increasing number of businesses in the area of consulting.  When the consultant is an independent contractor and the income is earned by a Nevada corporation, the corporation has no presence in the foreign jurisdiction, only the contractor does. Thus, the contractor must pay home-state tax on his income but the corporation earns its income in Nevada.  There can be tremendous tax savings if the contractor lives modestly and draws only what is needed to meet living expenses while profits accumulate in the private, arm's-length Nevada corporation.

Where the business is more product-related rather than service-related, provision number 7 can come into play. Ensure that the orders generated require acceptance from Nevada before becoming binding contracts. If this can be arranged and orders can be shipped from Nevada, then the facilitation of sales from, say, California, does not necessarily mean that you are "doing business" in California.

PLEASE BE SURE TO CHECK THE CURRENT REGULATIONS IN YOUR JURISDICTION AND STAY WITHIN ALL GUIDELINES. When a simple one-corporation strategy won't work, often a two-corporation strategy can be put in place (see "I Live in Another State" strategy).

Please contact us with questions or comments:
Budget Corporate Renewals, Inc.
Phone: (702) 870-5351; FAX: (702) 880-7044
PO BOX 26930 - LAS VEGAS, NV 89126


LEGAL NOTICE: Information on this site is not intended as and shall not be construed to be LEGAL ADVICE.
When dealing with legal matters, you should always avail yourself of the services of a qualified member of the Bar Association.
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