Nevada Incorporation - Make Sure You Do It Right!

By: Gust Lenglet

So you want to have Nevada incorporation? Well, it may be just what you want and need, or it could be a nightmare. It may very well be that Nevada incorporation is the right step for one company, and a misstep for the next.  Besides the low cost for a Nevada incorporation, it provides owners with beneficial and unparalleled asset privacy. The filing fee for Nevada incorporation is $125.00, and is more affordable than most states. Another advantage of Nevada incorporation is privacy of ownership and the absence of a state income tax.

Most companies do NOT qualify to take advantage of Nevada incorporation's benefits, so be sure that you check out the various requirements.  Your resident corporation can maximize profits by taking advantage of the tax laws, and members of an LLC (owners) pay taxes on the income, yet have the advantage of limited liability as the shareholders of a corporation do. You can get every advantage used by big corporations at low cost which is one of the benefits of tax savings by a Nevada incorporation.

The state of Nevada has issued requirements for incorporation, primarily a residency test. In order to properly form a substantiated Nexus base in Nevada the following requirements should be met: (1) a compliant Nevada formed Corporation or LLC; (2) A Nevada office* (leased or owned) with physical and mailing address; (3) Nevada staff working in Nevada; (4) Nevada bank account; (5) Nevada phone number; (6) Nevada Business Registration; (7) Continuously maintain appropriate records, filings, and accountability. Anything less is a facade that requires home state registration and may negatively affect protection, privacy and tax advantages. A non-resident can have Nevada incorporation as long as he/she registers in their home state as well. This will generate additional filing fees; however, if you want total privacy, it might be worth it.

The benefits of Nevada incorporation are amazing! Numerous benefits are offered to existing and new businesses that incorporate in Nevada and they enjoy many benefits just not available anywhere else. For one, no taxation upon shares of stock held by non-residents and no inheritance tax upon non-resident holders. Pro-business Nevada, unlike almost every other state, has taken a stand! No Corporate Income Tax.

• No Taxes on Corporate Shares
• No Franchise Tax
• No Personal income tax

No IRS Information Sharing Agreement

Nevada's corporate statutes started with those of Delaware and then went even further, establishing a corporate entity that allows investors and owners of Nevada corporations to remain off the public record - an advantage that is unique throughout the world. Since these statutes took effect in 1991, the number of new incorporations in Nevada has exploded.  The bullet-proof protection inherent in Nevada corporations, however, takes it to a new level, making it virtually impossible for creditors and litigants to get at your hard-earned assets.  That just might be the main reason there were over 40,000 incorporations in Nevada last year alone. It looks like more and more business-savvy people are discovering the tremendous advantages that complete protection offers! Unlike most other states, there has never been a case in which the corporate veil was pierced in Nevada, except in the instance of fraudulent activity. This means your personal assets receive maximum protection when separated from business activities by a Nevada corporation.  Nevadas Supreme Court consistently stands strong on preserving this protection, even when a corporation fails to maintain basic corporate formalities (though we strongly recommend you do so).

Some other important benefits are a Nevada incorporation can be organized with very little capital, if desired. Many states require that a corporation have at least $1,000 in capital. One person can hold the offices of President, Secretary, Treasurer, and be the sole Director. Many states require at least 3 officers and/or directors. Thus, there is no need to bring other persons into a Nevada corporation if the owner does not desire it. A corporation can be formed by mail, fax, or phone and the person incorporating in Nevada never has to visit the state, even to conduct annual meetings. Meetings can be held anywhere in the world at the option of the director(s).

No reciprocity with the IRS. Nevada is the only state in the union that does not share information with the Internal Revenue Service. Many tax professionals also believe that this reduces your chances of an audit because less matching of tax return information means fewer chances of something standing out.

We trust that this information on forming a Nevada incorporation has been helpful. We cannot stress enoughget all of the facts and requirements for a Nevada incorporation, and contact a professional for advice in your particular situation. The purpose of this article is not to give you legal advice or recommendations, but to point out to you some of the requirements and caveats.

 Gust A. Lenglet is an accountant and financial advisor for many years. He is President and CEO of HBS Financial Group, Ltd. and offers online tax filing as well as income tax articles and information.