Attention Nevada LLC Owners: Are You Paying Too Much to Renew Your LLC?

If you’ve got a Nevada LLC, you know that there are usually two renewal fees. One is paid to the Secretary of State, and has been $125/year for as long as I can remember.

The second is paid to the Nevada Department of Taxation – or it was, up until recently. That fee has fluctuated over the years, depending on whether your LLC was operating in-state or out-of-state. Most recently, it was impacted by a ‘temporary’ fee increase of $100. Currently the fee is $200 per year.

Historically, we would pay those two fees separately, writing two checks and sending them to two different addresses. That changed recently, when the Secretary of State began collecting the business license fee, and everything was pushed to the new online system.

But a little-known fact emerged with the online system. There are some exemptions to that $200 filing fee. Non-profits are exempt, as are companies who create or product motion pictures. However, the most interesting – and applicable – exemption for many people is the home-based business exemption.

If you’ve got a home-based business that is earning about 2/3rds of the average annual wage, you can request an exemption from the business license fee. According to the government’s Social Security Online website, in 2009 the average annual wage was just over $40,000. So, if your LLC is making 2/3rds of that amount – about $26,500 – you can legally claim an exemption.

This is great news if you’ve got an LLC that is just starting out, or if you’ve got an LLC that simply exists to hold non-income producing assets. For example, plenty of people have put their personal home into a disregarded LLC for asset protection. Because it’s disregarded, they keep all of the tax benefits homeowners receive, yet they’ve got far better protection that putting the same family home into a revocable trust. And, by taking advantage of this exemption, they’re saving $200/year.

Most people didn’t know about the exemptions on a widespread basis, because there wasn’t an awful lot of publicity given to them. But now, the way the online filing system is set up, the list of exemptions is one of the first things you see when filing an Annual Report. Users are quickly discovering that they have a perfectly legal right to take this exemption, and they’re doing it. A lot of users. So many, that the government has noticed the drop in revenue, specifically because people are opting out of paying the $200/year business license fee.

The Nevada government is currently considering a proposal to tighten up this loophole so it doesn’t apply to any formally incorporated business (corporation, LLC or limited partnership). But for the time being, this is the law of the land, and if your LLC, corporation or limited partnership qualifies, you’ll definitely want to take advantage of this saving on your next Annual Report filing. If you don’t file your own Annual Report, and let your resident agent or another 3rd party filing service handle that for you, make sure you let them know that your entity has a valid exemption.

There are many variables when you’re structuring a business. That’s why it’s hard to go through a quick-service website. Unless you talk to someone who’s got some knowledge and experience on both the tax and the legal side, it’s hard to know what you don’t know. And that can leave you vulnerable.

Got questions? Contact us! We’re here for you.

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