The United States is offering a few States that will not require business entities to pay income taxes. These states are Wyoming, South Dakota, Texas, Ohio, Nevada, and Washington. Among those states, Texas and Nevada are popular choices for people from California. Especially for Nevada, you will enjoy not only state tax-free for personal and corporate level, but it also provides excellent asset protection to your assets.

One thing you need to keep in mind for the tax-free privilege from the above states is that it only applies if you have a legitimate business purpose, and your company transacts business within those states. For example, if you formed a Nevada entity and used it to transact business in California, you will still need to pay California state taxes. It is a common mistake people make when thinking as long as they form a Nevada entity and it will automatically exempt them from paying state taxes. Your tax liability is incurred from the source of income where you conduct your business, not where you form your entity.

It is vital to consult with your accountant before forming an entity in other states to avoid unrealistic expectations in tax savings.