Thanks for your reply John. Some follow-up questions:
So I think you are saying that that the tax advantage, Wyoming law allowing, would be that the net income on notes held by the company in Wyoming, could be subject to no state income tax. However, the rest of the deal would still be subject to Illinois state tax. Just because you are incorporated in Wyoming, you still have to pay taxes in Illinois where you are conducting real estate transactions. Correct?
You are also saying that the IRS can subpeona and audit the company records at will. Correct?
As far as liability protection goes: if I am a shareholder of the company, signing “as President” on contracts executed in Illinois, would the suitor and their lawyer come directly to me and depose me? Would this not eliminate the benefit of the non-reciprocity position of Wyoming corporate info sharing (under the assumption that they have this stance)? Or are there other significant financial/administrative hurdles that would provide a barrier from the legal actions?
I have spent a lot of time studying various options of creating entities through which to invest in real estate. I understand the benefits and importance of land trusts, LLCs and SCorps. I was all ready to go and form companies in my home state of Illinois, but a fellow investor, whose opinion I value, suggested that forming an SCorp or LLC in Illinois may not be the best vehicle for asset protection and minimizing taxes but rather look at incorporating in Nevada or Wyoming. In addition to having no state income tax, Wyoming apparently is not reciprocal with other states or the IRS with regards to certain corporate disclosures, making it tough and expensive for out of state interests (attorneys/suitors) to initiate a basis for a law suit. My investments include wholesale flipping, creative financing and lease options. Can you please provide a brief summary of the pros and cons of developing these entities out of state, and the basic requirements of setting up a corp with an address which will be producing 100% of its revenues out of state? Thanks!
Re: Out of State Corp/LLC - Posted by JHyre in Ohio
Posted by JHyre in Ohio on April 25, 2002 at 06:14:07:
Illinois will require registration, fees and taxes for out of state entities, making them more expensive. Nevada is good for holding intangibles, like notes owed to you, or notes made by your Illinois company to you. In some states, there are opportunities to shift income out of state via use of NV finance or royalty companies. I do not know about Wyoming, but because NV does not share info with the IRS, companies located there are subject to higher-than-usual audit rates.