Corporation Nevada Benefits Problems – The Issues

September 15, 2004
By Richard Smith

Regardless of where your business actually operates from, incorporating a company in Nevada can certainly be beneficial. On the other hand, if one is not careful, there are a number of problems with incorporating a business in Nevada. To assist you in making a decision of whether or not to incorporate your business in Nevada, the following corporation Nevada benefits problems looks at some of the issues you should make yourself aware of prior to incorporating in Nevada:

• there is no state corporate income tax imposed.
• there is no state personal income tax imposed - on employees or shareholders’ dividend payments.
• privacy, with respect to Nevada corporations, is paramount.
• Nevada is the only state in the United States that doesn’t freely share records with the Inland Revenue Service – because there are none!
• unlike other states in the United States, the corporate veil has only ever been pierced in Nevada on two occasions (both of these back in the 1970s). Piercing the corporate veil is where liability may be put on the officers, directors, employees or agents of the corporation.
• unlike other states, Nevada has no requirement that accurate, up-to-date, records of stock ownership be maintained. Which, in fact, is moot, as the privacy laws allow you little room to check this information anyhow!
• even if you could ascertain who owns stock in a Nevada corporation, state law allows corporations to issues bearer shares, and the use of nominee shareholders.
• finally, under Nevada law it is not even a requirement that the corporation have stockholders; a corporation can issue bonds or debentures that give these rights to the bondholder or debenture holder.

As can be seen then, the three primary reasons for incorporating in Nevada include: (i) no taxation; (ii) as close to absolute privacy as it is possible for a corporation to achieve in America; and (iii) almost zero chance of the corporate veil being pierced, thus true limited liability status.

The problems of incorporating in Nevada
Unlike the benefits of incorporating in Nevada, problems with incorporating in Nevada center principally around those who incorporate in the state but do not reside there. These include having to maintain a registered agent, and having to file documentation in other states where they undertake business that reduce the privacy benefits listed above.