Corporations and Partnerships

darkknight301

Should I incorporate in Las Vegas? I believe the tax benefits would be substantial no?

Babbaloo

Tricky question. Nevada does not have an income tax for corporations or individuals, so the issue here is whether incorporating in Nevada will save a foreign resident on his state income taxes in the state ion which he live.

Generally, if you live in California, or any other state that has an income tax, it won't do you much good to incorporate in Nevada, assuming you are setting up a small closely held corporation. In these situations, I recommend forming an S corporation (see new thread I will put together). As the California owner of an S corporation, you will pay California income tax on all income that passes to you from a foreign corporation. So by incorporating an S corp in Nevada, you are not going to save any California income tax. But you will have to go through the added hassle of registering your Nevada corp in California to conduct business in the state, and paying the same annual fee of $800 that California charges its own corporations.

In an S corporation situation for California residents though, there may be some savings from the fact that California also charges a 1 1/2 percent tax on S corporation profits. A California S corporation doing business in other states will pay tax on the profits from all sources. A Nevada S corporation will only pay tax on profits apportioned to activity in California. So an S corporation doing substantiall business outside of California may save some taxes by incorporating in Nevada in this regard.

This story is substantially different if you are forming a big company with profits from outside your state of residence.

Babbaloo

An S Corporation is a regular old, bog standard corporation that is owned by a small number of individuals (not other corporations or partnerships) that elects to be treated as a Small Business Corporation under Subchapter S of the Internal Revenue Code. (Hence "S Corp").

S corps were born out of the problem of 'double taxation' suffered by regular corporations (C Corporations). Corporations, like individuals, pay federal income tax. Partnerships do not pay income tax, but merely report income, and pass the burden of tax down to the partners. Each partner in a partnership (including members in an LLC) are responsible for reporting and paying the tax on or their share of the partnership's income.

Now, because C Corporation's pay income tax, the left over after-tax cash (retained earnings) is often times distributed to the shareholders as a dividend. Shareholders then pay tax on the dividends they receive. So ulimately, ever dollar earned by a C corporation is taxed twice (at least as far as the Shareholders are concerned): First, the corporation pays income tax on that dollar (between 15 and 35% or so), then, when the shareholder receives a dividend, the shareholder pays an additional 15% tax on the dividend.

Generally, in big corporations, shareholders like both dividends and the appreciation of their stock and the direct and indirect tax impact is just a cost of ownership. But in small corporations, where the shareholders are active in the management, the double tax is a real burden. The owner's sentiment goes - I bust my ass for my business and I have to pay you 20 cents on the dollar. Then, to get the 80 cents left out of my business, you're telling me I have to pay another 12 cents? That leaves me just 68 cents! Kerist that sucks!

Enter the S corp. For all legal and practical purposes it is a corporation, but, like a partnership, it does not pay federal income tax but simply reports earnings and passes the taxable profits down to the shareholders.

And there you go.

Godfather

THERE'S FECKING ASS LOADS OF MONEY TO BE FOUND IN COMPANIES THAT ARE ENVIROMENTALLY FRIENDLY....ME AND A FEW PEOPLE I KNOW IN THE COMMUNITY WENT TO AN ENVIROMENTAL CONFERENCE RECENTLY (TRUDEAU'S KID WAS THERE; REAL DICK ACTUALLY!!) AND THERE WERE SOOO MANY COMPANIES THAT HAVE THE ABILITY TO MAKE MILLIONS (LIKE A COMPANY LOGGING TREES TRAPPED UNDER WATER IN AREAS FLOODED BY DAMNS WITH A ONE OF A KIND MACHINE (TRITTON LOGGING OR SOMETHING)).

NOW I KNOW DAMNED WELL IT'S A REAAALLY RISKY VENTURE, BUT DO YOU KNOW OF ANY ENVIROMENTALLY FRIENDLY COMPANIES THAT ARE PUBLICALLY TRADED THAT I COULD LOOK AT TAKING A PEICE OF BABS?

Godfather

I wonder if that's even the type of question you're looking for

If it's not, I'll find some questions; I love this kinda thing

Noodles

You are right about the underwater logging. The wood is well preserved especially in colder climates. It is old growth wood. Much better than the stuff from the tree farms or the hardwood logging that is destroying rain forests.

Babbaloo

I'm not much of an investment advisor but there is another company out there that has salvage rights to log-hauling ships that sank in the Great Lakes a hundred years ago. They are pulling up some incredible old growth wood and making a killing on it.

darkknight301

Babbaloo

darkknight301