Nevada is not a shelter from state tax
Dear Karen: I’m a California business owner. Can I save on taxes if I establish my company in a tax-free state like Nevada?
Answer: This is a persistent myth.
California allows a credit against its state income tax equal to the amount of income taxes you pay to other states. So, if you’re a California resident and any part of your income was taxed by another state, you may claim that tax as a credit against your California state income tax.
If your income is not taxed out of state, however, you’ll have no credit to claim and will wind up paying the full state tax, said Michael T. Hanley, a certified public accountant with Merl & Hanley. For most small and mid-size companies, it’s best to establish your firm in the state where you do the majority of your business.
“This ensures that you do not have additional reporting requirements, administrative provisions, state filing fees, accounting fees and legal fees in order to do business elsewhere and report your business activity in California,” Hanley said.
Avoid Net domain renewal scams
Dear Karen: You recently mentioned fraudulent DBA [doing business as] notices. You might also want to alert readers to the problem of phony website domain renewals.
Answer: Thanks for the excellent suggestion. Indeed, some website registration firms search out soon-to-expire domain names, then mail or e-mail the owners official-looking renewal notices that give the impression they are the original registrar.
If you pay the interloper’s bill, the firm removes your domain name from your original registrar and transfers it to its jurisdiction. Along the way, the firm might charge you more for renewals or lock you into a long-term contract.
To avoid getting duped, take a few moments to set up a spreadsheet or a list of all your company’s contracts and legal documents, noting when you set them up, when they come up for renewal, what agency you contracted with and how much it cost.
Getting a handle on amateur ads
Dear Karen: What is consumer-generated advertising?
Answer: It is television and online advertising that is produced by amateurs hoping to win a contest or get exposure for their creativity. These ad spots can be useful for small companies because they cost one-quarter to one-third what professionally produced advertising costs, said Neil Perry, acting chief executive of XLNTads.
“There are remarkably talented people who have technology and great ideas. The actors are their best friends or cousins, the music may be provided by the garage band next door, but suddenly a small to mid-sized business can get the benefits of TV or online ads without the enormous cost,” he said.
His firm, which brokers arrangements between local companies and creative types, gets 100 finished pieces for every work order posted on its website, he said.
“The business owner picks and chooses. About 20% of what we get will be junk, 60% will be interesting ideas but the quality’s not quite there, and 5% to 20% are cable TV-ready ads. You could pick it up and put it on cable TV tomorrow and feel comfortable that your company, product or service is represented pretty professionally,” he said.
The fact that the homemade ads are not terribly slick can be a plus. “There’s nothing more relevant than real people using your brand and talking about what makes it special to them,” he said.
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