California Businesses Incorporating In Nevada - Is It Legal?

Written by Richard A. Chapo

California is a notoriously bad state to do business in. Regulations, worker’s compensation and tax issues overwhelm companies. Seeking relief, many incorporate in Nevada. Unless done carefully, this decision can lead to disaster.

Doing Business - Jurisdiction

Jurisdiction is a legal term used to define who has authority over something. Applied to this article,repparttar term refers torepparttar 143559 issue of which state hasrepparttar 143560 right to regulate a business. In California,repparttar 143561 issue boils down to whether you are considered to be “doing business” inrepparttar 143562 state.

California isrepparttar 143563 one ofrepparttar 143564 most aggressive states when it comes to defining jurisdiction. If you maintain offices or have employees inrepparttar 143565 state, you are considered to be doing business here. You must register withrepparttar 143566 state and pay taxes even if incorporated in another state. This tends to makes incorporating in Nevada an expensive option since you have to pay fees twice.

If you are caught “doing business” in California without having registered, you can be in for a rough time. Initially, back taxes and fees come due. You are also going to be fined and probably suspended from doing business until an audit can occur. The California Employment Development Department may levy back taxes and penalties. Your bank accounts may be frozen. Let’s look at an example.

The California Franchise Tax Board tends to look atrepparttar 143567 facts surrounding a particular situation. Assume I own a Nevada entity forrepparttar 143568 purpose of building web sites. I receive e-mail, snail mail and work out of my house in San Diego. The tax agency is going to takerepparttar 143569 position that I am doing business in California. My office is here. I take calls here. I dorepparttar 143570 work here. This scenario is going to be very difficult to defend. Playing outrepparttar 143571 scenario, I will probably end up going out of business due to disruptions, stress andrepparttar 143572 resulting financial burden.

FTC Requires Companies To Destroy Consumer Records

Written by Richard A. Chapo

On June 1, 2005,repparttar Federal Trade Commission issued new regulations requiring companies to destroy certain consumer records. The specific rule requires consumer information such as credit reports to be physically destroyed after it is used.


The rule covers practically any consumer records. Examples include credit reports, court records, employment histories and rental histories to mention only a few.

Identity Theft

Heading complaints from constituents, Congress has been trying to figure out how to deal with growing identity theft problems. In response,repparttar 143558 FTC rule requires all personal information to be:

1. Burned(!),

2. Pulverized,

3. Shredded, or

4. Destroyed.

Whether you shredrepparttar 143559 records or stand inrepparttar 143560 parking lot with a flamethrower,repparttar 143561 rule requiresrepparttar 143562 documents to be destroyed torepparttar 143563 extent they cannot be read. Importantly,repparttar 143564 rule also applies to electronic files.

As an agency rule,repparttar 143565 new regulation does not result in any criminal penalties. Instead,repparttar 143566 FTC penalty provisions call for a fine of up to $2,500 per violation. Individuals that have information misused can also seek damages in civil lawsuits.


Cont'd on page 2 ==> © 2005
Terms of Use