| NEVADA VS. DELAWARE OVERALL
• Delaware has a franchise tax; not in Nevada.
• Delaware has an income tax; not in Nevada.
• Delaware is regulated by a corporation commission, not in Nevada.
• In Delaware, you have to report the date of your annual meeting; not in Nevada.
• In Delaware, you have to disclose the location of your principal business outside of Delaware; not in Nevada.
• In Delaware, stockholder info is public record - not in Nevada.
• Delaware's annual filing fee is about $150 - it's $125 in Nevada. OVERALL NEVADA HAS:
• No corporate income tax
• No taxes on corporate shares
• No franchise tax
• No personal income tax
• No I.R.S. Information Sharing Agreement
• $125 annual filing fee to the Nevada Secretary of State
• Minimal Reporting and Disclosure Requirements
• Stockholders are not Public Record BEST STATE FOR LOWERING TAXES:
In putting together strategies to benefit you and your family, the courts allow flexibility in your arrangements. A classic example of this involves the payment of taxes. According to federal judge Learned Hand in Helvering v. Gregory, 69 F.2d 809 (2d Circ. 1934), "Anyone may so arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes. This ruling was in turn confirmed by the U.S. Supreme Court: "The legal right of the taxpayer to decrease the amount of what otherwise would be his taxes, or altogether avoid them, by means which the law permits, cannot doubted." (Gregory v. Helvering, 293 U.S. 454 (1935). And one of the best states for legally reducing your tax obligation is Nevada. NEVADA VS. OFFSHORE
Nevada is unique -- it not only offers a high degree of privacy but ready access to your capital that is not likely to be denied in even the most extreme turmoil that could develop in the world’s financial markets. In these highly uncertain economic times, long-range planning should take into consideration the possibility—even the probability—of extreme turmoil. In that event, there could be some real shock felt by those whose strategies are oriented around offshore structures. It is entirely possible that in a real emergency offshore funds would be totally inaccessible, depriving the owners of those assets the use of their own capital when they need it the most as during and after the turmoil caused on 9/11. For any situation where ready access to one’s capital is required, and especially if you wish to work with your capital, Nevada corporations are the best answer. NEVADA VS. DELAWARE
Delaware is not “tax-free”. Its franchise tax has a graduated rate depending on capitalization, amounting to a minimum of $30 and a maximum of $130,000. In addition, a Delaware corporation’s taxable income is taxed at the rate of 8.7%.
• The fundamental distinction is that while Nevada’s statutes create benefits for private corporations, Delaware’s corporate statutes have primarily been designed to benefit shareholders of public corporations. Many large, public companies that trade on various exchanges across the country incorporate in Delaware to provide the best protection to their shareholders. In recognition of the foregoing, Delaware’s corporate law with regard to corporate takeovers is the strongest anywhere in the country. If you want to go public some day, Delaware’s disclosure requirements probably won’t bother you.
• Nevada’s corporate law easily surpasses Delaware’s in terms of protection of corporate officers and agents. Delaware has recently adopted a statute that allows a corporation to limit the liability of a director for monetary damages—but officers are still not covered. The following acts of officers and directors would be protected under Nevada law, but are exposed to liability under Delaware statutes:
1. Acts or omissions not in good faith;
2. Monetary damages occasioned by acts of officers (directors are now exempt);
3. Breach of a director’s duty of loyalty;
4. Transactions involving undisclosed personal benefit to the officer or director;
5. Acts or omissions that occurred prior to the date that the statute which provides for indemnification of directors was passed and approved.
• It should also be noted Nevada has no reciprocity with the IRS. Delaware, like all other states, freely shares its data with the IRS. ONE PERSON
Unlike many other states, in Nevada only one person is required to form the corporation. A single individual can be named as the entire Board of Directors and all of the officers. FOREIGN INCORPORATORS ARE WELCOME
he state of Nevada does not require that any of the directors or officers be residents of the state. In fact, an out-of-state individual can set up a Nevada corporation without ever being physically present in the state! In most foreign jurisdictions, a Nevada-based corporation can have an office and even effect sales through contractors without having to register to do business in the other state. LOW COST
Because Nevada values its corporate business, it charges an annual filing fee of just $125. By way of comparison, annual fees in California, for instance, amount to almost ten times as much! Usually for far less than California’s annual filing fee alone, a Nevada corporation can cover its annual fee to the State of Nevada along with resident agent fee and other fees for mail forwarding and “nominee service” that can maintain privacy. ADDITIONAL ADVANTAGES
1. Nevada has minimal reporting and disclosure requirements.
2. Stockholders, directors and officers need not live or hold meetings in Nevada, or even be U.S. citizens. Such meetings may be held anywhere in the world.
3. Directors need not be stockholders.
4. A Nevada corporation may purchase, hold, sell or transfer shares of its own stock.
5. Nevada corporations may issue stock for capital, services, personal property (presumably not excluding “intellectual property”) or real estate, including leases and options. The directors may determine the value of any of these transactions and their decision is final.
6. Nevada law allows Bylaws to be changed by the directors.
7. Initial or minimum capitalization is not required—a Nevada corporation can be capitalized with “sweat equity”! THE BIG SECRET
While many may yet be unaware of this fact (including, surprisingly, some otherwise pretty intelligent attorneys and accountants), Nevada is quite simply the best state in which to incorporate because of its privacy, unparalleled liability protection, and tax savings. Even if you don’t live in Nevada, you can still avail yourself of the benefits that accrue to Nevada’s corporate shelters. And that just could be the Greatest Secret about Nevada corporations! PRIVACY
Privacy is probably the principal reason that the relatively small State of Nevada now ranks second in the entire country for the formation of new corporations. More and more smart business people and their Attorneys are discovering the tremendous advantages Nevada's statutes afford them including those affecting privacy of stock ownership. The inability to "pierce the corporate veil" along with the privacy strategies available make Nevada the ideal State to incorporate in.
• Privacy has been made inherent in Nevada’s corporate statutes which:
1. Do not require disclosure of the stockholders;
2. Do not disallow the use of “bearer” shares;
3. Do not require the issuance of stock;
4. Allow for a debt-holder to have all the rights of a stockholder;
5. Do not require the holding of annual meetings of the stockholders in cases where no stockholders exist;
6. Do impose strict sanctions against non-stockholders who attempt to inspect corporate documents, or who would attempt to use them for any nefarious purpose: RIGHT OF INSPECTION OF RECORDS
NRS 78.257 Right of stockholders to inspect and audit financial records; exceptions.
1. Any person who has been a stockholder of record of any corporation and owns not less than 15 percent of all of the issued and outstanding shares of the stock of such corporation or has been authorized in writing by the holders of at least 15 percent of all its issued and outstanding shares, upon at least 5 days' written demand, is entitled to inspect in person or by agent or attorney, during normal business hours, the books of account and all financial records of the corporation, to make extracts therefrom, and to conduct an audit of such records. Holders of voting trust certificates representing 15 percent of the issued and outstanding shares of the corporation shall be regarded as stockholders for the purpose of this subsection. The right of stockholders to inspect the corporate records may not be limited in the articles or bylaws of any corporation.
2. All costs for making extracts of records or conducting an audit must be borne by the person exercising rights under subsection 1.
3. The rights authorized by subsection 1 may be denied to any stockholder upon his refusal to furnish the corporation an affidavit that such inspection, extracts or audit is not desired for any purpose not related to his interest in the corporation as a stockholder. Any stockholder or other person, exercising rights under subsection 1, who uses or attempts to use information, documents, records or other data obtained from the corporation, for any purpose not related to the stockholder's interest in the corporation as a stockholder, is guilty of a gross misdemeanor.
• A gross misdemeanor conviction could result in punishment by incarceration for up to one year in the county jail AND a $2,000 fine. And please note that this statute spells out rights of the stockholders to inspect corporate records—the stockholders, not “just anyone”. There is no mandate of any kind for non-stockholders to ever inspect any corporate records. It is a gross misdemeanor for any non-stockholder to even attempt to use information from the corporate records in any way contrary to the interests of the stockholders.
• While NRS 78.105 requires the corporation to keep certain records at its registered office, the stated purpose is that such records are to be available for inspection by stockholders. What if there are no stockholders? Should those records be there, where someone may try to access them for purposes that are not in the best interest of the corporation, in violation of NRS 78.257? What should a well-intentioned director of a corporation that has not issued stock do? WHEN IS AN OWNER NOT A STOCKHOLDER?
If you own part (or all) of a corporation, you’re a stockholder, right? In Nevada, the answer to that question is, “Not necessarily.” Let’s look at another unique provision of Nevada corporate law:
• NRS 78.197 Rights of persons holding obligations of corporation.
• A corporation may provide in its articles of incorporation that the holder of a bond, debenture or other obligation of the corporation may have any of the rights of a stockholder in the corporation.
• With this provision in your Articles of Incorporation, you “may have any of the rights of a stockholder”—without owning stock! Thus, the holder of a note COULD own the corporation and could even be afforded the same voting rights as a stockholder—without being a stockholder.
• If this provision is not in your current Articles of Incorporation, check and see if this clause, or one like it, is:
ARTICLE VIII—AMENDMENTS
Except with respect to amending the non-assessability of shares per Article IV, this corporation reserves the right to amend, alter, change or repeal any provision contained in these Articles of Incorporation or its Bylaws in the manner now or hereafter prescribed by statute or by these Articles of Incorporation or by the corporation’s Bylaws, and all rights conferred upon the stockholders are granted subject to this reservation. If so, the corporation may “amend... these Articles of Incorporation... in the manner prescribed by... the corporation’s Bylaws”. In other words, the Articles of Incorporation are modified by the Bylaws.
• If this provision exists in your Articles, we suggest that you amend the Bylaws to reflect wording such as NRS 78.197 suggests for the Articles of Incorporation.
• If neither of these provisions exists in your corporation’s Articles, you might want to file an Amendment of the Articles of Incorporation. We can handle such a filing with the Secretary of State for you, just ask.
• There is, of course, a great deal more to the Nevada Revised Statutes, Chapter 78, relating to C corporations but it is not our intent to put detailed analysis of every provision on this site. We merely want to provide an overview of certain key elements. Click on any of the navigational buttons below to continue your study of PRIVACY: NOMINEE SERVICE (OFFICERS & DIRECTORS IN NAME ONLY)
The use of what is commonly called “nominee service” has been an accepted practice in the State of Nevada for something like 75 years. Typically, this service—offered by most of the largest and most well-established resident agents in the state—provides the name and signature of a nominee on the annual list of officers filed with the Secretary of State, the only—NRS-mandated—public record of the corporation. The use of nominee service is inherent in many of the strategies presented in THE NEVADA CORPORATION MANUAL. NOMINEE STOCKHOLDERS
The use of nominee stockholders is far less common (to our knowledge) but the flexibility of this device enables strategies that would otherwise be considered “impossible”. Many regulations aimed at determining a corporation’s status are determined on the basis of ownership. In Nevada, it is relatively easy for the real owner(s) of a corporation to enjoy privacy of ownership: For any matter of record, the corporation’s stock may be held by any number of “outside” entities—persons or corporations. BEARER SHARES
Since Nevada’s statutes do not preclude the use of “bearer shares”—i.e., shares made out to “bearer” instead of any named entity—when it is desirable to issue shares, why not make them out in this way? If nothing else, this tactic can be used to buy some time in arranging for truly trustworthy entities to hold the stock—to whatever extent and in whatever manner may best suit the corporation. We challenge others who say otherwise to find any legal precedent disallowing this strategy in Nevada. IRREVOCABLE PROXIES
Another technique used to control corporations is the use of irrevocable proxies—the right to vote the stock held by “someone else”. You have to be careful when using such proxies, however, as certain regulations contain wording such as, “who owns or controls the voting rights of stock”. In such cases, perhaps the best approach is to use the concept but “seal the deal” with a handshake instead of putting it in writing. This can work especially well in situations where the other participants have similar needs of their own. DEBT HOLDERS
Nevada’s corporate statute: NRS 78.197 allows a debt holder to have all of the rights of a stockholder, setting up the situation where a corporation which has not even issued shares could in fact be owned by a debt holder, who would be entitled to call for a “shareholders” meeting and to VOTE. GENERAL INFORMATION ON INCORPORATING IN NEVADA Why should I incorporate in Nevada?
There are numerous advantages to incorporating in the State of Nevada. Probably the most compelling reason to choose Nevada is that it imposes no state income taxes or annual financial returns. Also, the Secretary of State only requires minimal annual reporting; which is limited to submitting the name(s) and address(es) of the person(s) holding the position of Officer or Director. (As your Resident Agent we provide assistance to ensure annual compliance.) Additionally, the Nevada Revised Statutes do not impose restrictions on the place, time, or frequency of stockholders' or directors' meetings. Another important factor when choosing the jurisdiction in which you wish to incorporate is the anonymity protection afforded to the shareholders. Nevada does not require the name(s) and address(es) of the shareholder(s) to be publicly filed. What is a Resident Agent and what does one do?
The term 'Resident Agent' means the agent (natural person or legal entity) appointed by the Nevada corporation, upon whom process or a notice or demand authorized by law to be served upon the corporation may be served. The Nevada Revised Statutes require that corporations, and other such legal entities, retain the services of a Resident Agent who must have a street address for the service of process. The street address of the Resident Agent is the registered office of the corporation in the State of Nevada. Also, the Nevada Revised Statutes (78.105) further requires that a corporation must keep a copy of the following records at its registered office: (a) a copy certified by the Secretary of State of its Articles of Incorporation, and all amendments thereto; (b) a copy certified by an officer of the corporation of its bylaws and all amendments thereto; and (c) a stock ledger or a duplicate stock ledger, revised annually, containing the names, alphabetically arranged, of all persons who are stockholders of the corporation, showing their place of residence (if known) and the number of shares held by them respectively. In lieu of the stock ledger, the corporation may keep a statement setting out the name of the custodian of the stock ledger or duplicate stock ledger, and the present and complete post office address, including street and number, if any, where the stock ledger or duplicate stock ledger is kept. Please contact Nevada First Holdings, Inc. for information regarding records maintenance for Limited Partnerships or Limited Liability Companies. Why do I need Office Identity or a telephone number in Nevada?
You don't. However, many feel it gives added credibility to the corporation, especially where the owners are out of state. While a Resident Agent's address is sufficient, it might be worthwhile to invest in a Nevada domicile of your own. This is especially true if the company is threatened, seriously audited, or litigation is involved. What are the annual filing requirements of a Nevada corporation?
Nevada corporations must file an annual List of Officers with the Secretary of State setting forth the name(s) and address(es) of the person(s) holdings the offices of President, Secretary, and Treasurer as well as those serving on the Board of Directors. (The names of the shareholders are not subject to public registration.) Limited Partnerships and Limited Liability Companies have similar annual reporting requirements. The State of Nevada does not impose income taxes, and as such, an annual financial return is not required. The State does now require the registration of a Nevada Business License and pay a minimum of $100, NFH offers the service of registering this license on a one time basis for $50.00. Corporations must, however, file an annual federal tax return (IRS Form 1120) with the US Department of Treasury. Limited Partnerships and Limited Liability Companies have similar requirements, please contact Nevada First Holdings Inc. for further details. WARNING ABOUT NEVADA CORPORATIONS & LLCs RECENT CHANGES IN PRIVACY LAW.
It is reported that as of June 1, 2005, all Nevada corporations and Nevada LLC's mandate a Nevada State Business License application. This requires disclosure of stockholders, their SSN's, and percent of ownership disclosed. Even if you do not do business in Nevada, you must complete the Nevada business license and pay the $100 fee. ADVISORY ABOUT THE SECRETARY OF STATE OF NEVADA.
For years, Nevada incorporators promoted that they don't have an information sharing agreement with the IRS; however, it is reported that Nevada sells their information to information clearinghouses and database companies. ADVISORY ABOUT NOMINEE SERVICES.
Many incorporators and formation specialists sell corporations and LLCs with an attached Employed Identification Number (EIN) obtained by a nominee. While this is legal, the claim that it enhances privacy is false for the following reasons:
1) Any person who applies for an excessive number of EIN's find themselves a target of the IRS and increases your company's susceptibility to audits.
2) If you apply for the bank account, the bank will ask for your social security number and the EIN of the company. At this point, the bank employee calls the Office of Foreign Assets Control (OFAC) under the U.S. Treasury. The bank will screen the company name/EIN, and your name/SSN, together. The OFAC and US Treasury keeps a record of this inquiry and the EIN, and your SSN, are linked. Therefore, obtaining a "nominee EIN" offers no additional privacy or protection. It's an unneeded service. This is a federal requirement as mandated by the Patriot Act to screen out lunatic terrorist freaks. If your bank is not requiring an SSN to open the account, the bank employee and the accounts that were set up shall be eventually suspect, or frozen, until a warm body comes to claim the account. | |
