Nevada LLC for High-Tax State Freelancers: The Reality Check
You're a freelancer in California or New York pulling in $120K, $180K, maybe more. Someone mentions Nevada LLCs: "No state income tax! Privacy! Asset protection!"
Sounds perfect. Form a Nevada LLC and escape California's brutal tax rates.
Here's the truth: If you're sitting in your California home office doing the work, a Nevada LLC won't save you a dime in state taxes
The Nexus Problem: Why Your Home State Still Owns You
Physical presence creates nexus. If you live in California and perform consulting work from your California home office, California will tax that income. The state doesn't care that your LLC was formed in Nevada.
California Revenue and Taxation Code Section 23101 defines "doing business" broadly. You're doing business in California if you actively engage in any transaction for financial gain there.
Where your clients are located doesn't matter. You could be designing websites for Texas clients or writing code for Oregon startups. If you're physically in California performing that work, California considers it California-source income.
This means your Nevada LLC must:
• Register as a foreign LLC in California
• Pay California's $800 annual franchise tax
• File California tax returns
• Pay California income tax on the profits
You haven't avoided California taxes. You've just added Nevada's $350 annual fee on top of California's $800 franchise tax. You're now paying both states.
When Nevada Actually Works
Nevada's tax advantages apply only to Nevada-source income. The structure makes sense if:
You're relocating to Nevada within 1-2 years. Form the entity now, then move. Once you establish Nevada residency and perform work there, you genuinely benefit from zero state income tax.
You have actual Nevada operations—office space, Nevada employees, or Nevada-based assets generating revenue.
You're a true digital nomad with no fixed state residency.
For the typical California or New York freelancer working from home? Nevada alone solves nothing.
The S-Corp Strategy:
What Actually Saves Money If Nevada's zero state tax won't help, what will?
The S-Corporation election.
This federal tax strategy works regardless of where you incorporate. The S-Corp election can save you thousands in self-employment tax.
The Self-Employment Tax Problem
As a sole proprietor or standard LLC, you pay 15.3% self-employment tax on your net income. On $180,000 of net income, you're paying approximately $24,500 in self-employment tax alone.
How S-Corp Election Works
With an S-Corp election, you split income into two categories:
1 Reasonable salary (subject to employment taxes)
2 Distributions (not subject to self-employment tax)
Example at $180K total income:
• Pay yourself a $120K salary (reasonable for a consultant)
• Take $60K as distributions
• Save approximately $9,000 in self-employment tax
The IRS requires your salary to be "reasonable"—what you'd pay someone else with your skills. At your income level, 60-70% as salary is typically safe.
The Compliance Cost
S-Corp compliance is expensive:
• Quarterly payroll processing
• Additional CPA fees ($1,500-$2,500/year)
• Dual-state tax filings if using Nevada
• Registered agent fees
Total additional costs: $2,500-$4,000 annually.
Your $9,000 in SE tax savings minus $3,000 in extra costs = $6,000 net benefit.
But here's the thing: this works the same whether you form in Nevada, California, or Wyoming.
Why Not Just Form in California?
For someone living and working in California, forming a California LLC and electing S-Corp status is simpler and cheaper:
• California annual fees: $800 franchise tax
• One state to manage
• Lower CPA fees (single-state filing)
• No foreign qualification paperwork
You save $350/year in Nevada fees with zero downside.
Choose Nevada only if you need:
1 Privacy - Nevada doesn't publicly list member names
2 Future flexibility - Planning to move or expand
3 Superior asset protection - Nevada's corporate veil standard is stronger
Wyoming: The Budget Alternative
If you're set on forming outside your home state, Wyoming beats Nevada on cost:
Expense Nevada Wyoming
Annual state fees $350 $60-$75
Privacy level High Highest
Asset protection Excellent Very Strong
Wyoming offers nearly identical benefits at $275-$290 less per year.
Asset Protection: Nevada's Real Advantage
Nevada genuinely excels at asset protection.
To pierce a Nevada corporate veil, a plaintiff must prove:
1 Alter ego - The LLC was merely your alter ego
2 Fraud or manifest injustice - Statutory fraud occurred
Most states only require proving alter ego. Nevada adds a second, much higher hurdle.
Nevada also requires a "causal connection"—plaintiffs must prove that specific formality failures directly caused their harm. Minor technical mistakes won't cost you personal asset protection.
Who Benefits Most
• High-risk consultants giving strategic advice
• High net worth individuals ($500K+ in personal assets)
• Professionals without malpractice insurance
For typical freelancers with moderate income and standard liability? The difference doesn't justify the extra cost.
Privacy: The Federal Reality
Nevada's privacy is real at the state level but federally compromised.
Nevada doesn't require LLC member names on public records. However, you must list at least one manager on the Annual List. List yourself, and your name becomes public.
Solution: Hire a nominee manager ($500-$2,500/year).
The Corporate Transparency Act
The federal Corporate Transparency Act requires nearly all LLCs to file Beneficial Ownership Information with FinCEN. You must disclose your name, address, and ID to the federal government.
What Nevada privacy means now:
✓ Competitors can't easily find you in public searches
✓ Your name won't appear in Google results
✗ The IRS knows who you are
✗ Federal agencies can access your information
Privacy from the public? Yes. Privacy from the government? No.
The Honest Cost Comparison
Nevada LLC + S-Corp + California Foreign Registration
Annual Costs: $3,700
Annual Savings: $9,000
Net benefit: $5,300
California LLC + S-Corp
Annual Costs: $2,600
Annual Savings: $9,000
Net benefit: $6,400
The California approach saves you $1,100 more annually while being substantially simpler.
Strategic Timing Tip
California's first-year exemption: LLCs registered as foreign entities between October 1 and December 31 don't owe the $800 franchise tax for that partial year. Forming in November gives you 17 months before your first $800 payment.
Your Action Plan
Under $75K income: Stay simple. S-Corp doesn't justify complexity yet.
$75K-$150K income: S-Corp election in your home state makes sense.
$150K-$200K income: S-Corp election strongly recommended. Nevada vs. home state depends on privacy needs.
$200K+ with high liability: Nevada LLC + S-Corp + nominee manager justifies the premium for asset protection.
Step 1: Consult a CPA before forming anything ($300-$500 consultation).
Step 2: Calculate your actual tax savings potential.
Step 3: Choose your path:
• Home state route: Simpler, cheaper, 90% of the benefit
• Nevada route: Privacy and superior asset protection (if you need it)
• Wyoming route: Best for nomads or future movers ($275/year cheaper than Nevada)
The Bottom Line
A Nevada LLC won't eliminate California or New York taxes if you live and work there.
The S-Corp election saves money—and works in any state.
For most freelancers earning $75K-$200K in high-tax states, forming an LLC in your home state and electing S-Corp status delivers maximum tax savings with minimum complexity.
Save Nevada for when you're genuinely relocating, need elevated asset protection, or require maximum privacy.
Anything else is paying for benefits you're not receiving.
NOTICE: This article provides general information and should not be considered legal or tax advice. Consult qualified professionals before making incorporation decisions.