The U.S. Corporate Tax Rate

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Is the U.S. Corporate Tax Rate the Highest in the World?

There is a popular belief that the current corporate tax rate in the country is very high, and a reduction of the prevailing rate will stimulate investments which will have a wide range of positive effects on the economy. Those who support this theory are referring to the current rate which stands at 39.1% (the highest in the industrialized world). According to proponents, this income tax rate is putting U.S. corporations at a competitive disadvantage. But is there more to the story?

Income Tax rates by Country based on OECD 2005...
Income Tax rates by Country based on OECD 2005 data. “OECD Tax Database”. Organisation for Economic Co-operation and Development . . Retrieved 2007-01-30 . (Photo credit: Wikipedia)

The truth is that US companies pay the highest corporate tax rate, but the vast majority of them have perfected the art of not paying it. According to official government records, the amount of corporate tax collected by the government has reduced significantly over the years. The ratio of the corporate tax paid to the total pre-tax profit earned by US corporations is the lowest in history.

A recent report by the CTJ (Citizens for Tax Justice) had some shocking revelations. The organization analyzed the federal income taxes and pre-tax profits of 288 Fortune 500 corporations that recorded huge profits for the five years leading up to the year 2012. The following are some of the findings:

While the federal corporate tax rate stands at 35%, the 288 most profitable companies only paid a tax rate of 19.4% over the 5-year period. What is more shocking is that General Electric, Boeing, Verizon and Priceline.com did not pay any federal income tax over this period. 93 corporations (33.3% of those analyzed) paid a tax rate of less than 10% over this 5-year period.
Of the 288 Fortune 500 firms, 111 paid at most zero percent taxes for at least one year during this five year period. What’s interesting is that these corporations had a pre-tax profit of $227 billion, but paid no taxes. Whatever, the corporate tax rate in the country, the big companies usually find ways of paying less than they are required to.

Advantages of Incorporating in Nevada

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Nevada has spent the last several years revising its corporate code to become more suitable to small, privately held companies to incorporate in.

Nevada boasts no corporate taxes, maximum privacy and protection of private assets.  Other benefits include; many tax advantages, total privacy of shareholders, nominal annual fees, and no minimum initial capital requirements to incorporate.

Some of the tax benefits include no state corporate taxes, no franchise tax, no tax on corporate shares, and no personal income tax.

Probably the most appealing advantage is the protecting to your personal assets when you incorporate your business in Nevada.  The way a corporation is set up completely separates your assets from that of the business.  The business becomes its own entity even if you are the only owner.  In the case of a sole proprietorship, if a lawsuit is filed against your business your personal assets may be seized also.  Incorporating in Nevada provides you with a corporate veil that is almost iron-clad.  In the last 30 years the corporate veil has only been pierced twice.

The law that Nevada has established to protect personal assets from individual business owners also protects corporate officers and directors from any person liability.  As long as the company acts in a lawful manor Nevada offers unbeatable corporate protection.

State residency or the need to hold meetings in the state of Nevada is not necessary.  Stockholders, directors and officers do not need to be residents of Nevada.  They don’t even need to be U.S. citizens.

Nevada is the one of the best states to do business in. If you set up your business and incorporate it in the state of Nevada you will be able to take advantage of all the tax benefits and be protected in every way possible, there is no better way to run your business.

By: Shannon John

Marketing Manger, Laughlin Associates, Inc.

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