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Incorporating in Nevada
By Jay Butler
During the 18th century, corporations in America were formed by an act of congress for public projects and services, such as the building of damns or creation of manufacturing jobs. Charters were revoked for the violation of law or upon the life of the project.
Originally owners and managers of corporations were held liable for the mismanagement of all company affairs and criminal acts. These corporations could not own stock in other companies, possess ownership of non-essential property, nor make political or charitable contributions to influence law-making decisions within the legislative branch of the United States government.
Large central banks didn’t care for this and pushed New Jersey representatives to pass legislation called the General Revision Act in 1896, which privatized corporate charters. Delaware passed similar laws shortly thereafter and became known as the premiere state in which to incorporate in America for the next 101 years.
In 1997 Delaware began disclosing stock ownership information with the Internal Revenue Service and, combined with an 8.7% state corporate income tax rate, may no longer be the best choice for forming a private corporation. However, Delaware has some of the best anti-takeover clauses in the United States and is a worthy consideration should you wish to take your company public.
Wyoming has risen through the ranks as a viable alternative state in which to incorporate. Although they disclose available stock ownership to the IRS, Wyoming does not keep any records on file and therefore has no available information to disclose. It is a very clever strategy and certainly places the low cost of incorporating in Wyoming above most other every state in the union.
Nevada improved upon Delaware laws when forming their Nevada Revised Statutes in 1987 (later revised in 2001), wherein personal liability protection is determined by state statute and not by judicial determination on a “case-by-case” basis as in California courts. In Nevada, individuals are not subject to the unpredictable rulings applied by any particular judge, rather one can count on stable outcomes based on foreknown Nevada state law.
Nevada has developed a strong precedence for protecting the corporate veil, making it the most difficult to pierce of any state in the country. In fact, since 1987, only one Nevada “C” corporation has ever had its veil pierced. [Polaris Industries Corp v. Kaplan]. Under NRS 78.747 the protection and anonymity for officers, directors and stockholders in Nevada “C” corporations are unparalleled with any other state in the union as the nearly insurmountable burden of proof rests entirely on the Plaintiff to prove all three of the following NRS requirements to pierce the veil.
1.) The corporation must be influenced and governed by the person asserted to be the alter ego. When a corporation is not operating as a true legal entity and is being used by its shareholders as a “shell” to control private interests and assets or debts, the corporation is said to be the “alter ego” of its shareholders. A corporation may appear to be the alter ego of its shareholders when:
- No directors are elected;
- No corporate records are kept;
- No records are maintained by the shareholders;
- Personal funds or assets of shareholders are co-mingled with those of the company;
(e.g. no separate bank accounts).
If the shareholders have themselves disregarded the corporate form, the law will disregard the entity and shall not offer shareholders the protection normally granted to the corporation.
2.) There must be such unity of interest and ownership that one is inseparable from the other;
3.) The facts must be such that adherence to the corporate fiction of a separate entity would, under the circumstances, sanction fraud or promote injustice.
After the deplorable June 24th, 2010 Florida Supreme Court Ruling in Olmstead vs. FTC, Nevada amended their charging order protection under NRS 86.401 to specifically provide single-member limited liability companies the same exclusive remedy for a judgment creditor as with multi-member LLC’s. And with legislation enacted on October 1st, 2011, Nevada went a step further under NRS 78.746 to become the only state in America extending such charging order protection to “C” Corporations. Now Nevada “C” corporations are afforded the highest degree of protection from lawsuits filed by disgruntled creditors and zealous attorneys.
Tax, what tax? The great state of Nevada has no gift tax, no sales tax, no luxury tax, no property tax, no franchise tax, no capital gains tax, no succession tax, no tax on corporate shares, no individual income tax and no corporate income tax for entities whose gross revenues do not reach or exceed $4 Million per annum. Nevada entities are only subject to Federal income tax IF the respective entity has a profit upon reaching its fiscal year-end.
Nevada corporate stock holders and directors are not required to be U.S. citizens and meetings may be held by proxy anywhere in the world. Nevada requires no minimum paid-up capital and there are minimal reporting and disclosure requirements. Only the names and addresses of the corporate officers, directors and resident agents are on public record, but again Nevada recognizes privacy and permits the use of nominee officers and directors.
The primary business which may be exempt from paying the annual Nevada state business license fee under NRS 76.020 are government entities, non-for-profit organizations, motion picture studios, and limited types of insurance companies.
Choose a jurisdiction in which to incorporate wisely and always be sure to “Cover Your Assets”. Please contact our offices today at https://www.assetprotectionservices.com/apsa/contact/contact-us.php to receive your free private consultation and for assistance with forming an entity in the state which best suites your needs.
Asset Protection Services of America
Mobile (239) 309-8214
E-Mail [email protected]