For Small Business Owners & the Self-Employed

Insider Secret:

Secret of the Stars: NEVADA Corporations

If you're looking for a business entity to help you protect your assets, save taxes and ensure your privacy, consider incorporating in Nevada

by Alex Goumakos, CPA

What do Michael Jackson, Prince, Madonna, Chevy Chase, Paul Simon, Diane Keaton and Rodney Dangerfield have in common?  They all own NEVADA corporations. They also happen to be people who can afford the best legal and tax advice available anywhere in the world.  It's no surprise that their advisors all chose the State of Nevada as the best place to form a corporation. Why?

Well, for one thing, the State of Nevada has no individual or corporate income tax. So, if you form and operate your business in Nevada, you could potentially save thousands of dollars in state income taxes each year. 

But, unless you and your business are actually located in Nevada, you'll need to do a lot of planning and maneuvering to make it work.  The fact that Nevada has no state income tax is not the best reason for incorporating there (although not having a state income tax is a mighty big plus!).

The second reason why incorporating in Nevada is a smart thing to do is privacy.  The State of Nevada has some of the best privacy laws in the United States.  The Secretary of State does not keep a record of shareholder identities.  As a matter of fact, Nevada prides itself on protecting the identities of corporate shareholders and directors.  Because of this, there are minimal reporting and disclosure requirements. As long as you're diligent and know exactly how and what to report to the state, you should remain relatively anonymous.

While privacy is yet another plus for incorporating in Nevada, it is just a minor benefit. 

Another reason for incorporating in Nevada is the fact that the state does not exchange information with the IRS. Unlike other states that exchange taxpayer information rather freely with federal and other state taxing authorities, Nevada in effect says, buzz off.  But once again, this is only a small benefit compared to the REAL reason why you should consider incorporating in Nevada.

The real reason to incorporate in Nevada is the fact that Nevada is the hardest state to pierce the corporate veil. A Nevada corporation has the appearance of a steel fortress to creditors, taxing authorities, investigators, and other prying eyes. But there's more!

A Nevada corporation eliminates the personal liability of officers and directors to the stockholders of the corporation. In other words, the officers and shareholders of a Nevada corporation are not liable for acts committed on behalf of the corporation or by the corporation. 

In addition, Nevada law abolished "joint and several liability".  Should you lose as a defendant in a lawsuit, you will only be required to pay a share of the total judgment relative to your fault.

It used to be that Delaware was the place to incorporate. Not any more.  While Delaware is still a great place for large, publicly traded corporations, Nevada has come a long way in protecting the rights of smaller corporations.

If you are looking for a business entity to help you protect your assets, save taxes and ensure your privacy, do what the stars do; consider incorporating in Nevada.