Business License Fee Increase Could Cost Nevada $30 million

The Nevada Legislature is attempting a 100% increase in the Nevada Business License Fee. Here is my letter to the members of the Nevada Legislature. If you feel as I do, please call the the Nevada Legislature at 1-800-995-9080 and let your voice be heard.

To the members of the Nevada Legislature,

I am writing this email to explain why the Nevada Registered Agent Association believes the proposed Business License Fee increase could cost Nevada $30 million per biennium in renewal fees alone.

In past tax battles, our industry has never taken a “no new tax” stance. You will recall that the Registered Agents came to the table in 2001, and again in 2003 with solutions that allowed the Legislature to fund teacher’s pay increases and other critical needs.  Two years after we re-structured then-Governor Guinn’s corporate fee increases into something that we believed would raise the necessary revenue without harming the industry, we came within 1/2 of 1% of hitting our projections.

We hit that statistical “bulls-eye” because we know our industry - and more importantly, we know our clients.  It is imperative that you hear our message at this time. If we felt that you could raise the Business License fee without seriously and irreparably damaging Nevada’s reputation and standing as an incorporation haven, we would not only tell you - we would show you how to do it.

As you already know, thousands of small businesses - both local and from across the country -  have taken time to individually write you or call you in opposition to the fee increase.  Each one tells a unique story as to why they chose Nevada as their choice for incorporation, and each one tells a unique story as to their present business challenges in the most difficult economic times since the Great Depression.

The demographics of our client base are not comprised of the Fortune 500.  Our clients typically represent very small entrepreneurial startup companies.  Frequently these are one-man or mom-and-pop type companies.  We cannot avoid the fact that a very large percentage of individuals from out-of-state who have chosen to incorporate in Nevada did so because of cost savings. Filing fees, license fees, and our corporate tax structure have attracted them for many years in the hundreds of thousands.

In 2002, our Association conducted a study that determined that Nevada’s population only supported 20% of the corporate filings in the State, based on national filing statistics.  This means that approximately 80% of Nevada corporations have been imported from other states.  They are an extremely price-sensitive and mobile client base.  The very fact that they chose to incorporate in Nevada is proof that they are far more aware - and thus are far more likely - to take their business entities to other jurisdictions if the cost in Nevada is too high. They do not think the same way you do about this fee increase.  As the market responds to these fee increases - as markets always do - these entities WILL move elsewhere.

The Business License fee increase will result in a minimum annual renewal fee to the State of Nevada of $325 per entity (annual list + business license).  Compare this to $50 in Wyoming, and you see that we are not just talking about ”only $100″.  Nevada is simply pricing itself out of the market for our core small business client.

In a survey we have been conducting of our out-of-state clients, 51% of existing clients indicate that with the increased fee, they will no longer maintain their business entity in Nevada. Under 5% of those surveyed told us the increased fee made no difference.  Even more shocking, 83% of our existing clients (remember, these are our BEST clients, who already understand the benefits of incorporating in Nevada) told us that the increased fee meant that they would NOT incorporate their next business in Nevada. This will have huge consequences on Nevada’s position in the market as we compete with other states for business filings.

What is the bottom line? If half of our clients choose not to maintain their existing Nevada entities because we price ourselves out of the market, it will cost Nevada FIFTEEN MILLION DOLLARS PER YEAR in lost renewal revenue - or $30 million per biennium. This does not account for the State Business Licenses that will not be renewed, amendments that will not be filed, certificates that will not be ordered, etc.  It also does not account for the precipitous drop in new business filings that we will also see.

Please understand that we are NOT saying “don’t tax us.”  We are saying that if you impose this fee on our clients - our industry could largely disappear entirely. There is much more at stake than perhaps you have understood.