Forming a corporation in any of the 50 states offers limited liability, privacy, and tax benefits to one degree or another. Forming a Nevada corporation, however, takes these same concepts to a higher level, offering numerous advantages to the businessman or entrepreneur. Those looking for ultra-low state tax, privacy and confidentiality, a business and corporation-friendly environment will find forming a corporation in Nevada at the top of their list. This is primarily because the Nevada legislative and judicial branches of government have proven quite corporate-friendly and savvy. This pro-corporation approach is reflected in the numerous advantages afforded to Nevada corporations. Initially based at least partially on Delaware Corporate law, the Nevada legislators have taken the Nevada Corporate law even further with respect to high privacy and low taxation rights, as evidenced by their extensive corporate privacy and asset protection/limited liability statutes and regulations, and low to non-existent state taxation.
Privacy and Anonymity
Forming a corporation in Nevada practically guarantees privacy to shareholders, and privacy to vice presidents and other corporate officers. Shareholders are not a matter of public record in Nevada, and save for an appointed Director and Registered agents, the names of other officers in a Nevada corporation are protected and private under Nevada law. Unlike some other states, Nevada Corporations can hold their annual meetings anywhere, even a foreign country, with a majority sufficing for a quorum vote for any actions. These meetings can be held telephonically, or via various other “modern” means, leaving the door open to tele-conferencing, the internet, etc.
Nevada Corporate law also allows for “nominee” Director and Officer appointments that can further enhance privacy and confidentiality. A nominee Director or Officer is one that stands in place of the “true” owner or controlling entity of the corporation. Because Nevada requires that the name of the Director (or Directors) of a corporation be a matter of public record, a nominee Director can be in place as the only publicly disclosed officer or representative of the corporation (along with the Registered Agents, of course). Most nominee Directors or officers usually have minimum signor authority within the corporation, with no control of corporate funds or operational control of the corporation, and can be “voted out” at any time by the majority shareholder or controlling interest in the corporation. Again, because of the flexibility of the by-laws allowed by Nevada, almost any rule with respect to the appointment of nominee officers can be addressed in the by laws. Basically, these nominee Directors or Officers are such in title only, for public view, with the real controlling entity kept confidential!
This is another area where a Nevada Corporation can truly benefit your bottom line. The individual nominal taxation rate at the Federal level is approximately 28%--and this is not factoring in such things as Social Security tax, and Medicare tax; these would amount to a total federal tax burden of close to 45% for a non-incorporated individual. If you were to form a Nevada Corporation, the first $50,000 in net income would be taxed at the nominal corporate rate of 15%. This is a difference of 30% of your income!
Now, bear in mind that Nevada Corporations pay zero state income tax. Nevada does not charge franchise tax, capital stock tax, stock transfer tax, estate taxes, corporate income taxes, nor does it tax corporate shares. Because there is no state income tax in Nevada, your corporation would only be subject to Federal taxation. Compare this to what state taxes would be in , say, California, and you can begin to get a clear picture of just what these savings can amount to. Other states, such as California, assess substantial state income tax on corporate income, stock transfers, etc. In addition, if you anticipate your California corporation to have a tax liability of $500 or more, they mandate that you estimate the taxes and make quarterly payments. There are no such requirements in Nevada, because the state tax amount is ZERO.
You can form Nevada Corporations in conjunction with a well-thought out tax reduction plan, and develop many tax-reduction strategies based on the proper utilization of your Nevada Corporation.
Limited Liability and Statutory Protection
Nevada is among the most sought after states to incorporate in due in large part because it offers excellent asset protection and limited liability protections to its shareholders, officers, and directors. By statue, shareholder liability is expressly limited to the amount invested in the Nevada corporation. Quoting directly from the statute: (NRS 78.225) “Stockholder’s liability: No individual liability except for payment for which shares were authorized to be issued or which was specified in subscription agreement…no stockholder of any corporation formed in this State is individually liable for the debts or liabilities of the corporation.” Further, with respect to Directors or Officers of the Corporation, (NRS 78.747) “…No stock holder, director, or officer of a corporation is individually liable for a debt or liability of a corporation, unless the stockholder, director or officer acts as the alter ego of the corporation.” It doesn’t get any more clear than that. This is the very definition of limited liability. And the protection doesn’t end at the statutory level. When it comes to Nevada corporations, the Nevada courts are reluctant to allow any piercing of the corporate veil, save for extreme case of fraud or in cases involving a complete disregard of the corporate formalities.
No IRS Information Sharing
Unlike most other states in the union, Nevada has no information sharing agreement with the IRS and does not provide personal or corporate financial records to the IRS. There is no reciprocal sharing of financial or business data whatsoever. This can also be a huge advantage to you in implementing your tax-reduction strategies!
Stock flexibility is also a huge advantage afforded to Nevada corporations. Corporate obligations for real estate, services, etc., may be handled by the issuance of stock, at a value determined by the Director. Stock can also be exchanged or sold for cash, goods, real estate, etc. Nevada Corporations can issue different series of stock, with different values and rights, though there must uniformity within the series, and these values and rights should be described in the articles of incorporation, or by resolution of the board of directors.
The stock or shares in a Nevada Corporation may even be in the form of “Bearer Shares”. Precisely as the name implies, bearer shares literally provide for direct ownership of the stock by whomever is currently holding the shares. This can ease the temporary transition of ownership of the corporation in the event of an emergency (asset search by potential hostile litigants, for example). This is a fantastic privacy and asset protection feature. Imagine that there was an intense asset search by a court or regulatory agency. If you knew the threat was imminent, you could place the bearer shares in a safe “location or custody” where they are not under your control, and then truthfully answer, when questioned, that you do not, at that moment, own or possess shares in a corporation. You could regain possession of the bearer shares at any convenient point thereafter, and you will not have spoken any mistruths.
Bearer shares could also ease the transition of significant shares of the corporation from one place to another, with the utmost privacy as they are not subject to a normal stock certificate ledger and are valuable merely by possession.
Fast, Simple Incorporation
Nevada corporate regulations make it a very quick and simple proposition to form a corporation. After paying the low initial fee (approximately $125 if net value is $75,000 or less), and an annual corporate fee of only $85 (for an annual filing requirement of a list of directors and officers), the requirements are as follow: (NRS 78.30)
- One or more persons may establish a corporation by:
- Signing and filing in the Office of the Secretary of State articles of incorporation; and
- Filing a certificate of acceptance of appointment, signed by the Resident Agent of the corporation, in the Office of the Secretary of State.
- The articles of incorporation must [adhere to Nevada statute], and the Secretary of State shall require them to be in the for prescribed.
Nevada corporations can even be formed telephonically or via the internet, and all within 24 hours. There is no minimum corporate capitalization requirement (other than the filing fee), and no minimum number of people required to hold the various corporate officer positions--in Nevada, one person can hold all officer positions if they so desire.
Nevada Corporate code has no residency requirements. Other than the mandated legal age of 18, a Nevada Corporation owner can live in any other state, or can literally be a foreigner in another country. This is especially helpful to those seeking to conduct business nationally, yet wishing to minimize their state income tax. However, in order to maximize on the tax reduction benefits of a Nevada corporation, the corporation must be a “resident” Corporation and must have a physical presence in Nevada. But don’t fret! There are ways to own “resident” Nevada Corporations from a distance--please see our “Nevada Corporation Headquarters Program” for more information on this valuable service.
Nevada Corporate Formalities Requirements
All states require certain actions on the part of the corporation in order for it to maintain its separate legal entity status. These actions, known as the “Corporate Formalities,” are the vehicle by which a corporation shields its shareholders from direct liability and provides for many of the tax and business benefits mentioned. Under Nevada corporate law, the formalities are very basic. These formalities can be summarized as follows:
- Establish clear, thorough Corporate bylaws
- Hold Director and Shareholder meetings at least annually
- Maintain accurate Corporate Minutes and Records in a Corporate Minutes book
- Conduct all Corporate Transactions in Writing
- Ensure that there is no co-mingling of corporate and stockholder funds.
These are the basic formalities that should be observed in order to maintain the corporate status of your company in Nevada. There are, of course, other requirements, such as annual filing of a list of Directors and officers, but these are also very straightforward and basic.
It should be evident that choosing Nevada as the state to incorporate offers substantial advantages not readily found in other, so-called low regulation states. From privacy to ultra-low taxation, Nevada’s favorable business laws are hard to beat!