Why You Shouldn't Form an LLC in Nevada

Regardless of what you’ve read online, most people should not be forming an LLC in Nevada.

In order to best explain the reasons, let’s look at an example:

Daniel is a resident of California who runs an online business from his home in California. He reads online that, “Nevada is the best state to form an LLC,” so he forms an LLC in Nevada.

Let’s discuss the issues that will arise in this situation, including:

• Domestic LLCs vs. Foreign LLCs
• Illegally doing business
• Legal jurisdiction
• Nevada LLCs aren’t as cheap as people think
• The headache

What is a Domestic LLC vs. Foreign LLC?

If you form an LLC in your home state, this is called a “Domestic LLC“. Meaning, the LLC is domestic to that jurisdiction.

If you want this Domestic LLC to do business in another state (a different jurisdiction), you must register that LLC in the new state. Once that LLC is registered in the new state, it is known in the new state as a “Foreign LLC“.

It’s technically just 1 LLC doing business in 2 different states.

The LLC originally has authority to do business in its home state, since that’s where the Domestic LLC was formed. And then it must file as a Foreign LLC in every state it wishes to do business.

So in our example, Daniel has only formed a Domestic LLC in Nevada.

Tip: If you’re interested in expanding your business to multiple states, we’ll explain more about the difference between domestic vs foreign LLCs.

Your Nevada LLC may be illegally doing business

Since Daniel is running his business from his home in California, his Nevada LLC is illegally doing business in California.

What counts as “doing business”?

Pro Tip: “Doing business” has more to do with where you are running and operating things from instead of where your clients and customers are located.

A lot of our readers ask us if they have to register their LLC in every state where their customers are located. No, you don’t have to. You can just form your LLC from wherever you are running the business.

Even if Daniel has no employees in California, no office in California, and no clients in California, he is still running the business from his home in California.

Furthermore, California not only has strict corporate laws around doing business in the state, but they also have strict taxation laws around doing business in the state.

This means that in addition to the LLC costs in Nevada and California, Daniel may receive fines and penalties from both the California Secretary of State and the California Franchise Tax Board.

And he’ll end up paying California LLC annual fees and taxes anyway (which may have been the reason he considered a Nevada LLC in the first place).

In order to avoid fines and penalties, he must register his Nevada LLC as a Foreign LLC in California.

Foreign LLC Registration

In order to remedy the fact that Daniel’s Nevada LLC is illegally transacting business in California, he’ll need to register his Nevada LLC as a Foreign LLC in California.

This means he now:

• has 2 LLC filings to maintain (a Domestic Nevada LLC and a Foreign California LLC)
• has 2 state filing fees
• has to meet annual requirements and fees in 2 states
• may have increased Registered Agent fees

So in hopes of obtaining certain Nevada LLC benefits, Daniel has instead complicated the situation, increased his fees, and will most likely get no benefits from Nevada.

The court has discretion about legal jurisdiction

If Daniel was looking to obtain certain legal benefits by having a Nevada LLC, those benefits may not apply in a court of law.

If Daniel’s LLC is involved in a lawsuit, the courts have discretion on which state laws apply.

Since Daniel is doing business in California, it’s possible that the courts may decide that Nevada law doesn’t apply and that California law applies instead.

So the legal benefits of forming the LLC in Nevada are now useless.

Nevada LLCs aren’t as cheap as people think

A lot of people hear that filing LLC Articles of Organization in Nevada is cheap, or that Nevada is a good state to start a business because they don’t have corporate income tax.

That information is very misleading, and most often ends in business owners owing more money than they would have by forming their LLC where they live and/or do business.

How much does it cost to start a new LLC in Nevada?

Many websites only mention the Nevada LLC Articles of Organization fee of $75, but fail to disclose the full filing fee of starting a new LLC in Nevada, which is $425.

The Nevada Governor approved Assembly Bill 123 in 2017. This change in the Nevada LLC law requires all new LLC applications to also include:

• an Initial List of Managers or Managing Members ($150), and
• a Nevada State Business License ($200).

These filings are both due at the same time you file your Articles of Organization ($75). (The only exceptions are LLCs that are exempt from a state business license.)

Again, that’s a $425 Nevada LLC filing fee.

And if you need to hire a Nevada Registered Agent, that will increase your costs by another $100 to $200 per year.

Furthermore, the Nevada LLC Annual Fees are $350 per year:

• $150 for an Annual List, and
• $200 for the State Business License renewal.

Even worse, if you later realize that you need to register a Foreign LLC in your home state, now you have all these fees mentioned above ($425 to setup and $350 per year) in addition to the Foreign LLC fees in your state. Yikes! This can get expensive quickly.

Nevada has no corporate taxes

A lot of people get really excited when they hear that “Nevada has no corporate income tax!”

Unless your LLC is taxed as a C-Corp, this won’t even apply. And this is the case for 99%+ of our readers.

Said another way, most LLCs don’t pay corporate taxes since LLCs are pass-through entities.

Meaning, in their default tax classification, LLCs already don’t pay corporate income taxes. The profits from the LLC “flow through” to the owner’s personal income tax return and are paid on the individual level (not the entity level).

So the fact that Nevada doesn’t have state corporate income tax really doesn’t even matter for LLCs.

Furthermore, you pay state income taxes where the money is made, not where the LLC is formed.

Taxes are paid where the money is made

Even if there are applicable tax advantages in Nevada, this won’t apply if you’re doing business in your home state (or in another state).

State income taxes are paid where the money is made. So in Daniel’s case, he would get no tax advantages whatsoever by having an LLC in Nevada and instead, he’d be paying all his state income taxes in California.

What’s worse, is that the Nevada Department of Taxation may require an informational return to be filed. This means additional costs for Daniel’s accountant to file a “zeroed-out” return in Nevada and apportion the LLC’s earnings to California.

The headache

Although the money may not be a huge deal for some people, the headache can be quite overwhelming for others.

We hear all kinds of horror/frustration stories about LLCs being set up in the wrong state.

We recently heard from a real estate developer, who after acquired land and built a subdivision. Afterwards they found out they shouldn’t have formed their LLC in Nevada, and wanted to move the LLC to their home state.

Then, they were pretty much “frozen” in a state of inaction when they realized how complex a conversion/re-domestication filing was (moving an LLC from one state to another). Not to mention the need to close a bank account, open a new one, draft internal agreements, re-register their new LLC with vendors and suppliers, update the IRS, and more.

The time and opportunity cost was well into the tens of thousands of dollars.

Takeaway

Save yourself the money and the headache.

Just form your LLC in your home state or the state where you’re actually doing business.

Why You Shouldn’t Form an LLC in Nevada FAQs

Information verified on October 27, 2026

Matt Horwitz

Founder & Educator, LLC University®

Matt Horwitz is the leading expert on LLC education, and has been teaching for 15 years. He founded LLC University in 2010 after realizing people needed simple and actionable instructions to start an LLC. He's cited by Entrepreneur Magazine, Yahoo Finance, and the US Chamber of Commerce, and was featured by CNBC and InventRight.
 
Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. He performs extensive research and analysis to convert state laws into simple instructions anyone can follow to form their LLC - all for free! Read more about Matt Horwitz and LLC University.