Incorporate in Nevada? Not so Fast

Many clients who come to our firm hear from someone that incorporating in Nevada is the way to go. It’s private, there are no state taxes, and it’s kind of sexy.


However, before you file those papers, think again. California tax laws may change your mind.

The reason to file in a particular state most often is motivated by tax issues. Most people believe that they won’t have to pay state income tax if they have a Nevada Corporation. The California Franchise Tax Board will determine if you do business primarily in California or not. If your federal tax return shows any “nexus” or connection with California, you will be taxed by California in accordance with the proportion of revenue that you receive in California.

Say, for example, your sales reps are in Nevada, but your main office and your home are in California. The Franchise Tax Board, in an audit, has the ability to look to see where your credit card and gas card charges are from. If it looks like you live in California, and it looks like your business is operating out of California, they can charge you California taxes. The amount of taxes you pay to California is also affected by the percentage of revenue you receive from California sales in relation to other states. So somebody with an internet business where the goods are shipped from a manufacturer in Florida to somewhere outside the state of California would not be subject to California tax. But if you are shipping from California, you are subject to California tax.

There are many exceptions to the rules, and specific circumstances that can change the result. That’s why it’s good to see an attorney who can help you sort out which state is best for incorporation. Our firm will walk you through the decision making process to make sure you accomplish the result that you want.

Disclaimer: The information provided is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to your particular issue or problem. Use of this information or any related information does not create an attorney-client relationship. The opinions expressed at or through this site are the opinions of the individual authors and does not reflect the opinions of any firm or attorney.

If I set up a living trust, does this guarantee that my estate will not have to go through a probate?

Unfortunately, despite what most people believe, the answer to this question is not always “No”. Yes, a properly drafted living trust is very effective at avoiding probate of your estate at death; however, there are several situations which can arise which will require some, or maybe even all, of your assets to still have to go through probate. In fact, many of the probate cases I handle for my clients are for one or two assets that were just not in the decedent’s living trust.
One primary reason for this is that when people create their living trust, especially when they try one of the “do it yourself” methods, they fail to properly “fund” the trust. What this means is that they do not re-title all of their assets like real estate, bank accounts, and brokerage accounts into their living trust.

Another reason for this is that people simply fail to review their trusts and assets on a regular basis to ensure that they are still funded in their trust. For example, it is extremely common that when you refinance your home, the lender will require you to pull the property out of your living trust to fund the loan. After escrow closes, people often forget to put the property back into their trust and then, when they pass away, they have a piece of real property out of their trust that requires a probate action to put it back in the trust.

Problems like this can be avoided by many easy steps. The most obvious and least expensive way to do this is to be sure all of your assets are funded in your trust and to have an annual trust review. Another important step really goes back to the formation of your estate plan and having the proper contingencies in place. This is in the drafting language in the living trust and all the supporting documentation to your living trust. With proper planning and evidence, there are ways to petition the court to transfer assets back into your living trust, even after your death, without a formal, lengthy, and expensive probate proceeding. To find out more about how you can ensure your living trust will avoid probate, call Amy Alvis at Alvis Frantz and Associates, A PC at (925) 516-1617.

Disclaimer: The information provided is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to your particular issue or problem. Use of this information or any related information does not create an attorney-client relationship. The opinions expressed are the opinions of the individual authors and does not reflect the opinions of any firm or attorney.