We're going to have to drop the "United" part and just call ourselves "S.A." 

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Establishing such companies requires only filing some simple paperwork with the Nevada secretary of state. California firms can then shift their income to the shell corporation, even though no business is transacted in Nevada and all operations and executives remain in California.

State officials say the law is clear: Money earned in California is taxable in California. Authorities are only a few weeks into their investigation but have already turned up enough activity for the tax board to launch a dozen audits.  

Tax-Averse Firms Cross a State Line
California businesses are incorporating in Nevada, where there is no income tax. State officials call it fraud and vow a crackdown.
By Evan Halper, Times Staff Writer

CARSON CITY, Nev. — Forget complicated wire transfers to the Cayman Islands or secret Swiss deposit boxes. Californians who want to hide their money from tax authorities are increasingly opting for a simpler alternative: socking it away just over the state line.

No need for savvy accountants or high-priced lawyers. Seminars, webcasts and radio advertisements bray that it's easy to slash a California tax bill — or eliminate it altogether — by creating a corporation in Nevada, where there is no income tax on businesses or individuals. Set one up online with a few keystrokes and a $395 credit card payment! For a little extra, a Nevada mailing address, telephone number and bank account can be added.

Promoters peddling the packages call it good tax planning. California officials call it something else: tax fraud. They say the cash-strapped state's coffers are being drained as even some of the smallest California businesses shift their profits into hastily created corporate shells in the Silver State.

"We want to catch this scam before it gets out of hand," said state Controller Steve Westly. "We think it will cost the state tens of millions of dollars if this continues."

After months of urging by tax preparers, the California Franchise Tax Board, of which Westly is chairman, has begun investigating reports that there has been a surge of interest from California in setting up shell companies registered in Nevada.