| Once a decision had been made to incorporate, the | | | | process where a court removes the protection |
| next question will inevitably be where to incorporate. | | | | provided to the individual members of a corporation |
| One of the more attractive options available is to set | | | | and holds those individuals personally responsible for |
| up a Nevada corporation. | | | | the acts of the corporation. In other words, if the |
| There are many advantages to forming a Nevada | | | | corporate veil is pierced in your corporation, you will |
| corporation, but before exploring these, it may be | | | | personally become liable for its debts and obligations. |
| advisable to understand from the outset what | | | | Each state has different tests for evaluating the legal |
| incorporating in Nevada will not do for you. | | | | propriety of piercing the corporate veil. |
| Incorporating in Nevada will not lower costs | | | | Many states, such as California, Florida, Georgia, |
| You must have heard the statement quite often that | | | | Louisiana, Texas, New York, and Pennsylvania, allow |
| organizing a Nevada corporation will result in lower | | | | this process to be initiated quite easily. Other states |
| costs. The truth of the matter is that it won't and that | | | | may require a certain level (usually substantial) of |
| incorporating in your home state may well end up | | | | capitalization or net assets for a corporation to be |
| being cheaper. The primary reason is that Nevada | | | | respected and not pierced. Sometimes failure to |
| imposes a number of fees on corporations domiciled in | | | | comply with annual formalities (like stockholder |
| that state. Fees that many home states do not charge. | | | | meetings, corporate minutes, and Board of Directors' |
| Incorporating in Nevada will not lower taxes | | | | meetings) may be viewed as sufficient reason for |
| There is also a misperception that if you register as a | | | | piercing the veil. |
| Nevada corporation, you will lower your taxes. Whilst | | | | Nevada takes a much more liberal approach. In fact, its |
| Nevada has no corporate income tax, you still need to | | | | supporters enjoy highlighting the fact Nevada has only |
| file corporate tax returns in those states where you | | | | allowed the corporate veil to be pierced twice in the |
| operate as a non-resident. Things sort of cancel out, | | | | past 26 years. There have been many Nevada |
| and in the end you don't really save. This myth of | | | | corporations that neglected documenting resolutions |
| lower taxes is widespread, probably encouraged by | | | | and minutes, failed conduct meetings, had little |
| incorporation service providers. These providers play | | | | capitalization, or commingled funds, amongst others |
| on the extreme privacy that Nevada provides, thus | | | | without having the veil pierced. In most other states, |
| implying that no one will ever find out. Privacy does not | | | | these corporations would have been held culpable. |
| exactly equate to exemption from taxes, and it is not | | | | The bottom line remains that a Nevada corporation |
| legally correct to believe that this will be the case. | | | | offers more privacy and confidentiality than any other |
| Why then would you incorporate in Nevada? | | | | state. Perhaps even of greater importance is the fact |
| Without question the most compelling reason to | | | | that stockholders, officers and directors of a Nevada |
| establish your business as a Nevada corporation is | | | | corporation are safeguarded in most instances against |
| that the state offers the greatest protection from | | | | being held personally liable. Next to these, the other |
| liability. | | | | advantages of incorporation in Nevada pale by |
| There is a well-established concept in corporation law | | | | comparison. |
| called "piercing the corporate veil." This is the legal | | | | |