Nevada Challenged on Business License Exemption

If you’ve got a Nevada entity, and have successfully claimed an exemption from the business license fee of $200/year in the past, then you probably know the state isn’t allowing that exemption any more. But all may not quite be lost. A group made up of resident agents and others have launched a lawsuit against the state, claiming that the state has no legal right to make the claim. Click here to read the case filed against the state.

Last year, in an attempt to protect revenues, the NV Secretary of State’s office attempted to change the state’s existing law, to require more businesses to pay the $200/year business license fee. As the law was written, business owners could claim an exemption from the business license fee if they met certain conditions, including operating from a home office location, and not exceeding a certain revenue threshold. The state’s position was that many businesses were wrongfully taking the exemption.

Faced with continuing to lose money, chasing down those who were wrongfully taking the exemption, or changing the law, the state tried to change the law to eliminate the exemption. But the change was rejected by lawmakers, on grounds that it was unfairly applied to incorporated businesses and not to Schedule C Sole Proprietorship businesses. So, the Secretary of State’s office switched tactics.

In July 2011, the state issued a memo declaring that it had reinterpreted existing state law to comply with its new position. All businesses were considered to be subject to the business license fee unless they met three conditions: (1) home-based business, (2) met the existing income-threshold, and (3) were physically located in Nevada. Then, the state immediately began issuing notices to business owners who had taken the exemption in the past, asking them to provide proof that they met these new guidelines, or to pay up past years fees.

The only problem is, there’s nothing in state law that backs up this new position. The lawsuit contends that the state is simply attempting to circumvent the legislative process to accomplish its own goals.

So, what can you, as the owner of a Nevada entity do?

If you need to keep your entity in Nevada, right now your only choice is to pay up. Depending on how the lawsuit shakes out, you may be able to apply for a refund down the road, but there’s no way to determine this just yet.

If you don’t need to keep your entity in Nevada, then you might want to consider moving it to Wyoming. With lower fees, strong asset protection laws and no state taxes, Wyoming is quickly becoming home to hundreds of Nevada businesses, who are choosing to walk away.

The process to move is pretty straightforward. We’re offering a deal to clients and non-clients alike who want to make the move. For $395 (including resident agent & filing fees), we’ll take care of the paperwork and get you moved over to Wyoming. To take advantage of the offer, your Nevada entity must be in good standing at the time we start work. If you’re already in default for failing to pay fees, you can’t move the company until you first bring it up to date.

Wyoming isn’t the right choice for everyone. Their paperwork processing system is old and the state doesn’t have Series LLC law. But if you aren’t in a hurry, and you don’t have a Series LLC, you will save money moving over.

Need help? Drop us an email, and we can get you pointed in the right direction.

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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