Why Incorporate In Nevada?

Why Incorporate in Nevada... Protection!

Further, Nevada is the only state to offer Charging Order Protection to the shareholders of corporations. This rule significantly limits the ability of creditors to seize corporate assets to satisfy the personal debts or liabilities of corporate shareholders. To date, Nevada is the only state to offer such protection although other states are in the process of enacting similar legislation.

California, with its entrenched anti business world view, has tried to make inroads on the Internal Affairs Doctrine by holding that the laws of the state of incorporation may not apply if an out-of-state corporation does not have sufficient contacts with its home state. California uses the term “pseudo foreign corporation” to describe corporations which in their view do not have sufficient contacts with their home state; the word “pseudo” means fake. If a California court determines that a Nevada corporation does not have sufficient contact with the state of Nevada, it can avoid applying Nevada law to a piercing action. In making this determination, the California courts look at the following factors:

1. Does the Nevada corporation have a Nevada address? If so, does it receive any mail at this address? Does it receive fax’s at this address? 2. Does the Nevada corporation have a Nevada phone number? If so, does it receive any calls at this number? 3. Does the Nevada corporation ever meet with clients or hold internal meetings in Nevada? Are its Shareholder Meetings in Nevada? 4. Does the corporation perform any of its administrative functions, such as tax preparation, bookkeeping, or corporate consulting in Nevada?

In sum, the more a Nevada corporation is tied to Nevada, the stronger its ability to defeat a California “pseudo foreign corporation” attack. To meet this objective, your Nevada Corporation should have a Nevada address, phone number, and bank account; a virtual office arrangement can provide this.

Additionally, the State of California has enacted a “pseudo foreign corporation” statute which provides that California law will apply to the “internal affairs” of foreign corporations doing business in California if more than 50% of the corporate stock is held by a California resident. See generally, California Corporations Code section 2115. However, utilization of a properly configured trust or estate plan may allow you to avoid the force and effect of this statute. Additionally, courts in sister states, notably Delaware, have held California’s statute unconstitutional as applied to their state.

Interestingly, the very existence of the California “pseudo foreign corporation” statute establishes that Nevada law is generally applied to piercing actions brought against Nevada corporations operating in California; if Nevada Law did not apply, there would be no need for this statute.

The bottom line: a Nevada Corporation does not create a 100% bullet proof shield. But if you ever get caught in the line of fire, you’re 100% better off to have the above arguments available to you than to face the fire without them.

Reasons to Incorporate in Nevada

There is no Corporate Income Tax. There is no Tax on Corporate Shares. There is no Franchise Tax. There is no Personal Income Tax. Stockholders, Directors, and Officers need not be residents of the state. Stockholders or Owners of Nevada Corporations are not Public Record. There is no succession tax. Corporate stockholders and directors are not required to be US citizens. Stockholders and directors are not required to live or hold meetings in Nevada. Corporate meetings may be held anywhere in the world Nevada allows corporations to determine what type of stock it will issue, including assessable, non-assessable and bearer shares. Nevada allows corporate by-laws to be changed by directors. Minimum initial capital is not required. There are minimal reporting and disclosure requirements. Only the names and addresses of the corporate officers, directors and resident agent are public record. Stockholders are not a matter of public record. As an owner or investor in a Nevada corporation, you may remain anonymous if you choose. You may appoint others to positions as officers and directors, and yet retain control of the corporation through ownership. One person may act as President, Secretary, Treasurer, and Director to fulfill all disclosure requirements. Our laws allow corporations to conduct business at more than one office and also allows them to hold, purchase, mortgage, and convey real and personal property in any of the states, or dependencies of the United States, the District of Columbia, or any foreign country. Nevada corporations can guarantee, hold, sell, assign, transfer, mortgage, pledge, or otherwise dispose of the shares or its capital stock, or any bonds, securities, or evidence of indebtedness. Nevada corporations may purchase, hold, sell, or transfer shares of its own stock. Nevada corporations may issue stock for labor, services, personal property, or real estate, including leases and options. The directors may determine the value of any of these transactions. Your corporate directors may, by majority resolution, designate one or more committees with a director or directors to manage the business of the corporation and have full power. As of March 13, 1987, officers and directors of a Nevada corporation are protected from being held liable for the acts committed on behalf of the corporation or by the corporation. Nevada is the only state in the United States that does NOT have a reciprocity agreement with the Internal Revenue Service Nominal Annual Fees

If you choose to set up a Nevada Corporation you will be in good company; Bill Gates and most Fortune 500 Companies including, Walmart, Microsoft, Amazon.com, the Home Shopping Network, and all the Las Vegas casinos have chosen to incorporate in Nevada. These people have the best and the brightest advisors at their disposal and they selected Nevada. Like you, they seek the highest level of personal and asset protection available in the United States. When your business card reflects that you own a Nevada corporation, knowledgeable customers and business people will cede that you are knowledgeable about business formation.