Table Comparing Nevada and California Corporations for California Businesses

Many incorporation service companies, and even the website of the Nevada Secretary of State, publicize claims about the advantages of incorporating in Nevada. Is this accurate information or misleading hype? Knowing the answer may save you a lot of disappointment and money.

The table below provides a quick overview of the claims frequently made about the advantages of Nevada corporations, and compares these claims to California businesses that incorporate in California and to California businesses that choose to incorporate in Nevada. While California has been selected as the comparison state, many of the same consequences apply to other states as well.

Nevada's Claimed Incorporation Advantages	California Corporations	California Businesses Incorporated in Nevada	Explanation
No Corporate Income Tax	Subject to income tax on California business operations	Subject to income tax on California business operations	California businesses incorporated in Nevada must "qualify" to do business in California and pay income taxes on business derived from California
No Franchise Tax	Subject to annual minimum franchise tax of $800	Subject to annual minimum franchise tax of $800	As above, California businesses incorporated in Nevada are subject to the same franchise tax requirements as California corporations
No Tax on Corporate Shares	Same as Nevada	Same as Nevada	Few states, California included, impose a tax on corporate shares
Stockholders Not Public Record	Same as Nevada	Same as Nevada	California, like most states, does not require any public disclosure of a corporation's shareholders
Principals Need Not Live in Nevada or Be U.S. Citizens	Same as Nevada	Same as Nevada	This is true in California and most other states
Directors Need Not Be Shareholders	Same as Nevada	Same as Nevada	This is a misleading claim by Nevada since no state requires that directors be shareholders
Stock Can Be Issued For Many Types of Assets	Same as Nevada	Same as Nevada	Like Nevada, California permits shares to be issued for any type of property, cash, services rendered, promissory notes, accounts receivable and many other items
Minimal Reporting and Disclosure Requirements; Nominal Fees	Same as Nevada, except lower fees than Nevada!	Same as Nevada, except reporting and annual fees are required in both states instead of just one	Both states require a periodic reporting of the names of officers and directors. However, Nevada charges an annual fee of $85. California only charges an annual fee of $25. Also, California charges a flat $100 to file articles while Nevada's fee is a minimum $175 with a maximum of $25,000 (based on the value of the authorized shares).
No IRS Information Sharing	May share some info with IRS	May be subject to info sharing on California operations	This is also a misleading claim since California does not obtain, nor share, any information about the shareholders of a corporation. However, if an "S" corporation election is made, the corporation itself MUST disclose the names, addresses, social security numbers and ownership interests of all shareholders directly to the IRS.

If you have a California business and are thinking about incorporating in Nevada, click here to learn more about California’s strict requirements imposed on California businesses incorporated in other states.