The term Nevada corporation refers to a business that has chosen to incorporate in the state of Nevada. Typically, a corporation will choose to incorporate in a state that offers them favorable tax breaks or other favorable corporation haven laws. Then, the corporation will conduct their business operations through various locations in the United States, or in some cases internationally.
Corporate haven laws are essentially laws that are designed to attract and benefit corporations through various different tax and filing incentives. Historically, corporate havens were only located offshore, and not in the United States. However, more recently states have begun to enact and maintain corporate haven laws in order to attract corporations and collect greater corporate taxes.
The state of Nevada is known as a “corporate haven.” This means that Nevada’s laws tend to make the business incorporation process more streamlined, as well as offer other various advantages for corporations. Nevada also offers several advantages for out-of-state businesses that choose to incorporate in Nevada. Corporations that are located outside of Nevada are known as foreign corporations.
What Are Some Advantages of Incorporating in Nevada?
As noted above, there are several advantages that are granted to corporations that choose to incorporate in the state of Nevada. Advantages of choosing to incorporate in Nevada include, but are not limited to:
- Corporate offices may be held by a single individual;
- There are no information sharing agreements necessary with the Internal Revenue Service (“IRS”);
- There is no state annual franchise tax, no state personal income tax, and no corporate tax for the state on profits made by the corporation;
- Nevada grants the directors of a corporation to adopt, amend, or repeal corporate bylaws (i.e. shareholders cannot change the bylaws of a Nevada corporation);
- Choice of using Nevada law (i.e. Businesses that choose to incorporate in Nevada may elect to use Nevada law if they are sued, even if they operate in a different state and have no other ties to Nevada other than the charter);
- Shareholders for Nevada companies aren’t required to disclose their identities in public corporation records; and
- Directors, officers, and shareholders, are allowed to be non-residents of the state.
In addition to all of the above advantages, Nevada laws also provide strong protections against lawsuits that attempt to “pierce the corporate veil.” Piercing the corporate veil refers to a situation where courts will put aside limited liability in favor of holding a corporation’s directors or shareholders personally liable for the corporation’s debts or actions.
One of the advantages of forming a limited liability corporation is that it provides protection to the owner(s) from being personally liable for the debts or actions of the business. Nevada provides numerous different corporate protections to prevent the corporate veil from being pierced. In fact, in the last 20 years, there has only been one lawsuit brought under Nevada case law that allowed the corporate veil to be pierced.
What Are Some Legal Issues to Be Aware of Regarding Incorporating in Nevada?
One of the most common legal issues associated with incorporating in a state with corporate haven laws is the issue of double taxation. Double taxation occurs when a company is taxed more than once for the same income. The second most common legal issue is when the company that is incorporated in Nevada also operates internationally. If a company operates internationally, then it will be known as a multinational corporation (“MNC”).
A Multinational corporation is essentially a business that is incorporated in one state or country, but also maintains business operations in other countries. When it comes to taxation of the corporation, the home state may tax the total worldwide income of the corporation. In these cases, the home country and state often offer a credit or deduction for foreign taxes that were paid on foreign income. This is an attempt to avoid the double taxation of corporate profits and income. Thus, corporations may need to file specifically for certain tax credits and deductions in order to avoid the issue of double taxation.
Nevada is one of a few states in the United States with no income state tax. Therefore, there is no requirement for a corporation to report foreign income to the state, only to the IRS. Thus, you will have to contact the IRS in order to find out how much, if any, taxes you owe for foreign income as a United States citizen. It is important to note that foreign income does not include the following:
- Pay that you receive as a military or civilian employee of the United States government;
- Pay received for service conducted in international waters or airspace;
- Pay otherwise excluded from income, such as lodging associated with employment, or meals; and/or
- Pension or annuity payments, including social security benefits.
As can be seen, it is important to understand all of the tax credits and deductions available in Nevada, if you are intending to operate a business internationally. Once again, Nevada will not tax worldwide income, as there is no requirement to report such income.
Does a Business Need to Be Located in Nevada to Incorporate There?
No, Nevada does not require a business to be physically headquartered in Nevada in order to incorporate as a Nevada corporation. However, Nevada does require the business that incorporates to have a registered agent within Nevada, as well as a legal address for the service of process in the state.
How Do Businesses Incorporate in Nevada?
In order to form a corporation in Nevada, one must perform a series of steps:
- Choose a name for the corporation. It is important that the name chosen is distinguishable from the names of other businesses already on file with the Nevada Secretary of State. Names are available to research in the Nevada Secretary of State’s business name database;
- File the articles of incorporation with the Nevada Secretary of State;
- File an initial list of corporate officers, directors, registered agent, and the state business license application;
- Appoint a registered agent for service of process in the state;
- Prepare the corporate bylaws that set out the ground rules for the operation of the business;
- Appoint the directors and hold the first board meeting. It is important to note that the incorporator, i.e. the person who signed the articles of incorporation, will appoint the initial corporate directors;
- File the annual list and state business license application with the Nevada Secretary of State; and
- Obtain a federal employer identification number (“EIN”) from the IRS. There is no filing fee for obtaining an EIN through the IRS.
Do I Need a Lawyer for Help With a Nevada Corporation?
As can be seen, there are many advantages for choosing to incorporate in Nevada. Understanding the various corporate haven laws is very important and can often affect the success of a corporation. Further, corporate haven laws require a thorough understanding of not only state tax code, but international taxes. Thus, it is in your best interest to consult with an experienced and local Nevada corporate lawyer.
An experienced and local business attorney can help you determine how best to incorporate according to the various corporate haven laws available. Additionally, an experienced attorney will also provide you with valuable legal advice regarding whether Nevada provides the most advantageous laws for incorporating.
Additionally, a Nevada business attorney will make sure you are meeting all of the filing and eligibility requirements in Nevada. Finally, an attorney will also be able to represent you in court, as needed, should any legal issues arise when forming a corporation.