Should I Incorporate In Nevada or Any Other State?

You should seek local council when considering incorporating in Nevada or any other state. The dynamics of incorporating in Nevada have changed since July 1, 2001. You may have read the changes involving Bearer Shares. Bear Shares are now outlawed in Nevada and the reporting requirements have changed. This has changed some perspectives on the subject of incorporating in Nevada, but other facts remain unchanged.

No corporation is allowed to do business in a state unless it is formed there, or it is qualified to do business there. Therefore, if a Nevada Corporation is looking to do business, for example, in the state of Florida, it must qualify to do business there by filing a registration statement with the Florida Secretary of State. This is particularly true if real property is involved, because it is impermissible for a corporation unqualified to do business in a state to hold real property there.

If the Nevada Corporation fails to qualify to do business in the state where it is located or holds property, then the state simply ignores it as if it never existed and ascribes ownership to the owners.

However, when a Nevada Corporation qualifies to do business in another state, then the corporation laws of that state and not the state of Nevada’s govern it. Therefore, none of the secrecy or privacy provisions of Nevada law will apply!

The costs of qualifying a Nevada Corporation to do business in another state usually are the same costs to form a completely new corporation in that state anyway. Therefore, the only real effect of using a Nevada Corporation outside the state of Nevada is that annual registration fees will double, as well as resident agent fees, without gaining any advantage from just filing a corporation in your own state to begin with.

There should be no surprises that “asset protection consultant” groups tend to ignore this detail in their information. The overlooked information never reaches the business owner. Most the clients will find out a few years later that all they have done is imposed an extra coat of fees. These fees are the same fees that they pay in their own state anyway, and all of this without any increase in asset protection.

In regards to Nevada Corporations and federal courts; the federal courts are governed by the Federal Rules of Civil Procedure, and are not concerned about contrary state law because, under theSupremacy Clause in the U.S. Constitution, they do not have to lend consideration. The bottom line is, if you get sued in federal court, Nevada law will not help you.

The state of Nevada is bound to recognize the judgment of other states. Therefore, should a judgment be entered against the owner of a corporation in the state of Illinois, the judgment would be enforceable against the owner’s stock in a Nevada Corporation.

Some promoters of Nevada Corporations try to use the sales pitch that Nevada Corporations save and avoids state taxes. This is false. To begin with, you should reread the above paragraph regarding the qualification to do business. Second, all the states are astute enough to recognize the arrangements where someone residing in the state of California attempts to avoid having to pay state taxes there through the use of a Nevada Corporation. These states now require disclosure of these arrangements. If you get caught, both the interest and penalties will be dreadful.

Regardless of what the promoters say, Nevada Corporations are not a cure-all and, in reality, probably would cause more problems and expenses than if a corporation was formed in the state where the owner resides.

If you are incorporated in Nevada or intend to incorporate in Nevada, make sure you get proper council.

Asset Protection World is ready to discuss your options for your Asset Protection Planning. Call us for a FREE consultation.