The Nevada Corporation is Officially Dead
The party is over!
Effective July 1, 2015, Nevada’s business license fee for corporations increased 150%, effectively putting the nail in the coffin for Nevada as a jurisdiction to consider when forming a business.
Yes, you read that correctly. The state Business License Fees will increase from $200 to $500 for corporations, and the annual list fees will increase by $25 for all entity types. (See, SB 483).
A Slow But Steady Death
The Nevada corporation has been gravely ill since October 1, 2009, when the Nevada Secretary of State started collecting the Business License with the Annual List (See, AB 146). Before 2009, the collection of the Nevada State business license was handled by the Nevada Department of Taxation, which resulted in it being inconsistently collected.
I have never been a fan of incorporating in Nevada. I have written extensively about how, in my view, Nevada has always been a poor and expensive choice for incorporating a business unless it will actually be conducting business in Nevada.
Delaware is the Better Choice
Delaware, on the other hand, has not imposed “junk” fees on those opting to incorporate in Delaware. Consequently, I feel Delaware has always been the better choice of jurisdiction for those seeking to incorporate in a state that offers flexibility and mobility.
Now, on top of Delaware being the better legal choice for jurisdiction, it is also significantly cheaper — $425 per year cheaper to be exact. Here’s the math: For corporations, the Delaware Annual Franchise Tax and Annual Report filing fee for corporations is $225, payable by March 1 annually. By contrast, as of July 1, 2015, the Nevada annual report fee is $150 and the mandatory Business License Fee is $500, resulting in a total annual payment of $650 for corporations.
Am I stuck paying this fee?
If the company is actually doing business in Nevada, you’re stuck paying the fee.
If the company is not actually doing business in Nevada, you might wish to consider converting the corporation to a Delaware entity. This would result in an annual savings of $425. The process to convert the company to a Delaware entity is a straightforward one, as both Nevada and Delaware permit conversions. The total filing fees would be $535 for both states.