Nevada Corporations

Reacting to criticism of its business laws, Nevada has enacted reforms aimed at making it easier for law enforcement officials to identify the owners of any company registered in the state. A Senate Permanent Subcommittee on Investigations hearing last year spotlighted testimony showing that Nevada was one of several states where a company's true owners could hide their role by listing the names of stand-ins in state records. Separately, USA TODAY reported in February that a thriving mini-industry has capitalized on gaps in incorporation laws and virtually non-existent oversight to promote Nevada and other states as secrecy rivals of traditional offshore havens.

Here's a good site on Nevada corporations:

When forming an entity in Nevada, whether it is a Corporation, Limited Liability Company or Limited Partnership it is critical that they are formed properly. Failure to do so may cause legal and tax challenges.

The business of forming Nevada corporations has skyrocketed over the last couple of years. Many people around the country are saving money in state taxes by incorporating in Nevada. States like California do not like losing state tax revenue to Nevada. They especially don't like it when people still live in California and operate their business there, while running all their profits through a Nevada bank account and not pay California taxes.

In any area, there is always misinformation that exists. For many years we thought the world was flat until there was some investigation to discover that was not true! That is also true in the business of forming Nevada corporations. The increase of companies forming Nevada corporations without doing their proper homework is taking many people down the path of uncertainly at best, and illegal activities at worst.

We estimate that 70% of the people that incorporate in Nevada are NOT going to be able to take advantage of the tax benefits that Nevada offers. It is becoming economically profitable by other states to review their procedures to make sure their tax is being collected and to do some checking. You will begin to find people that thought they were getting away with tax savings start to become audited for things they have done improperly over the last few years. In other words, just because you haven't been audited by the state taxing authorities does not mean you have structured your business properly.

Here's a good site on asset protection:

Many groups sell Nevada corporations as the "ultimate" asset protection device. Indeed, some groups even sell franchises that allow the average Joe with no experience or training to become an "asset protection consultant" and start selling Nevada incorporation services to their buddies.

The Pitch

The pitch of these groups is usually the same and focuses on Nevada allowing bearer shares and having a higher degree of secrecy and privacy. The claim is made that since the corporation has bearer shares that nobody can know who owns it. This is enhanced by the fact that Nevada gives some protection to the identities of the ownership of the corporation.

The Truth

While all this sounds good, it does not mean that the owners of the corporation can be kept hidden or that the corporation will offer special protections to either the owners of the corporation or the assets held within it. Indeed, as will be shown there are absolutely no advantages to using a Nevada corporation for somebody living outside of Nevada, or who get sued in federal court. Even within Nevada, the special benefits offered by the Nevada corporation are highly questionable.

Additionally, those who sell Nevada corporations do not fully disclose the tax effects of what they are selling – which is not surprising since they usually do not understand those tax consequences themselves (and have no education or worthwhile training on these subjects). Thus, somebody who purchases a Nevada corporation from one of these so-called "asset protection consultant" groups is probably putting themselves at risk of doing something that will unnecessarily cause them taxes down the road.