What a Nevada Corporation is and what it is not
I have heard people refer to Nevada corporations as a lot of things. And most of the time, most of them are wrong, dangerously wrong. One common description of a Nevada Corporation is that it is a bullet proof shield for personal assets. In the Land of Lawyers (aka the USA) there is no such thing as a bullet proof anything. And even if it is bullet proof, there will always be some lawyer who will file a lawsuit challenging the bullet proof and so you will still have to hire a lawyer to bullet proof your bullet proof. And as discussed in other sections, the ability to use a corporation to shield investors and officers requires a lot more work then filing a form with the Secretary of State and opening a business checking account.
Another common descriptor of a Nevada Corporation - an asset protection plan. The theory - you put all you assets in the corporation's name and then your assets are no longer yours. This way bankruptcy, ex-spouses, the IRS, the state government, no one, can get your stuff. The problem is - who owns the corporation? You do. That makes IT a personal asset. And if you go in to court and swear under oath you do not own the corporation you are committing perjury - lying under oath. And this is likely the second most insulting thing you can do to a judge - lie to him or her. (The first would involve directing unflattering names at the judge in an offensive manner.)
Of course you say, I have an out - I will not tell anyone that the company exists and thus I will not be lying when I do not discuss it. Wrong - if you respond to a judge, lawyer, or affidavit and omit the existence of said company that is also perjury because they are (most likely) asking you what businesses and companies do you own or control and leaving one off the list is a no-no.
Ah, that is ok, I will put someone else in charge of the company and issue barer stock to me. Thus it can never be traced to me. Three points to this theory:
(1) See above,
(2) See section on the subject of "there is no such thing as bearer stock anywhere in the Nevada Revised Statues.
(3) See above a second time.
Another common term used to describe Nevada Corporations - a tax shelter. It is true, Nevada has a business friendly tax environment. Tax free would not be accurate, but that is another discussion. What Nevada does not have is Gross Receipts or Income Tax. This makes business in Nevada look attractive in several ways. However, if your Nevada corporation owns and operates an auto dealership in California, California will still want their share of the (a) income tax; (b) sales tax; (c) etc taxes that the dealership makes from selling cars in California to Californians. Try telling The State of California that the car lot is owned by a Nevada Corporation and thus does not have to pay any California taxes. Please let us know how well this works so that we can include the information here for future reference. And either way, Federal taxes will apply regardless of where the money "is earned".
There are ways - legal and honest - to use Nevada Corporations as PART of an asset protection plan and as part of a tax mitigation or control plan. But guess what, you had better spend a lot of money on really good legal advice regarding this because done wrong will cost you more then doing nothing at all. And anyone selling you a fool-proof, bullet-proof, quick and easy solution is only practicing the art of "A fool and his money are soon departed" - you are the fool and you money will depart (you).
The author of this article is not a licensed attorney and this information is presented only for entertainment and general knowledge. Corporation Laws are very complex and require not only the assistance of trained and licensed attorney but preferably one that specializes in corporations and/or tax law. Additional assistance by CPAs, Tax Attorneys, Accountants and business management professionals may be required.