I run a small e-commerce business out of California and my accountant suggested forming a Nevada LLC. The annual fees and registered agent costs add up, but he says it's better for privacy and taxes. I'm trying to figure out if it's really worth the extra money for a business my size. Anyone been through this?
LLC Costs
Is a Nevada LLC worth the additional costs for a small business?
If you're actually operating in California, forming in Nevada won't save you state taxes. You'll still have to register as a foreign LLC and pay the $800 franchise tax. The pr ivacy benefit is real but limited.
i looked into this for my consulting work. The Nevada annual list fee is $150 and the registered agent runs about $100-$200 a year. But the California $800 minimum tax applies regardless of where you incorporate if you're doing business there. So the savings often don't materialize.
What's your actual revenue? For most small e-commerce operations, the extra Nevada costs outweigh the benefits. The asset protection myth is overblown too. If you're personally liable for something, the LLC state doesn't magically shield you.
My spouse has a Nevada LLC for a rental property there. That makes sense because the property is in-state. But for an online store with no physical presence? You'd be paying for a PO box and paperwork. The privacy angle can be defeated by a lawsuit subpoena anyway.
The only real reason I'd consider it is if you have significant personal assets and want to create jurisdictional friction for potential creditors. Even then, it's not foolproof. Most small businesses are better off with a lcal LLC and a good insurance policy.
Your accountant might be thinking about Nevada's lack of state income tax. But again, California taxes you on income earned there regardless. Unless you actually move the business operations, the tax benefit is a mirage.
I had a Nevada LLC for three years. The registered agent fees and annual reports were annoying overhead. Switched to a Wyoming LLC for my online business, but honestly I'm not sure that was necessary either. The main benefit was feeling like I was doing something sophisticated. A local attorney eventually told me it was mostly theater.
The privacy argument is weawker than it used to be. Nevada requires you to list a registered agent, and if you have a bank account or credit card processor, your name is often discoverable anyway. For a small e-commerce store, the cost and complexity rarely justify it.
If your accountant is recommending it, ask them to show you the math. If they can't point to a specific tax savings that survives California's rules, it's probably not worth it for your situation.