Properly formed and maintained Corporations can provide maximum “front end” protection or shielding of the owners/shareholders from the debts and liabilities of the corporation. As compared to Limited Liability Companies (LLC’s) and other business entities, Corporations generally have the drawback of having to comply with specific statutory “formality” requirements, such as organizational meetings, annual meetings, requiring designation of officers and directors. The failure to comply with the requisite business formalities may create some risk of the Corporation having its veil pierced and personal liability being attached to the shareholders/owners of the Corporation. Another drawback on the “back end”, as compared to partnerships and LLC’s, is that the shareholder’s stock may be attached by a shareholder’s personal creditors to satisfy a judgment. Because of this lack of back end protection for a Corporation, the Corporation is generally not a good choice from a Personal Asset Protection standpoint. [Note that the State of Nevada has recently passed a law that extends Charging Order Protection to Corporations with at least 2 and not more than 100 shareholders. (NRS 78.746). But, so far, Nevada is the only state that offers this “back-end” protection for Corporations. Charging Order Protection and what that means shall be discussed in more detail hereinafter.]
NEVADA CLOSE CORPORATION
The Nevada Close Corporation is designed for corporations that have less than thirty (30) shareholders and where free transferability of the stock is not desired. The Nevada Close Corporation statute is found in NRS 78A.001 et seq. and provides for a fully legitimate corporation but with fewer of the ordinary “corporate” statutory formality requirements and a simpler corporate structure. The stock of the Nevada Close Corporation may not be freely transferable and the stock certificates themselves must contain a restrictive endorsement on the certificate to notify potential stock purchasers that the transferability of the shares may be restricted under the company’s policies. The shareholders always have the option to agree to a proposed transfer/sale of shares. NRS 78A.050 also provides for a specific list of exceptions to the restriction on ability to transfer shares of stock. The close corporation may elect to operate without a board of directors. Unlike a ordinary corporation, annual and special meetings of the close corporation are optional but not required by law. NRS 78A.120 specifically provides that:
“Personal liability may not be imposed upon shareholders of a close corporation solely as a result of the failure of the close corporation to observe the usual corporate formalities or requirements relating to the exercise of corporate powers or management of its business and affairs, where such failure results from the distinct nature and permissible functioning of a close corporation.”
NRS 78A.030 allows and provides the procedure for an ordinary corporation to convert to a Close Corporation. NRS 78A.170 allows for a Nevada Close Corporation to terminate its status as a Close Corporation if it chooses to do so.
Why Form a Business in Nevada?
Nevada (often called the “new Deleware”) currently has what is considered to be the most favorable business entity laws in the United States which provide real advantages to businesses of all types. Some of the advantages over many other states of forming a Corporation or Limited Liability Company (LLC) in Nevada include:
- No State Corporate Income Tax
- No State Taxes on Corporate Shares
- No State Franchise Tax
- No Personal Income Tax
- No Internal Revenue Service (I.R.S.) Information Sharing Agreement
- Relatively low Annual Fees
- Minimal Reporting and Disclosure Requirements
- Stockholders are not Public Record (i.e., bearer shares are allowed in Nevada) (maintaining maximum Stockholder anonymity & privacy)
- Only one person is needed to create and maintain a legal Corporation or LLC
- Stockholders, directors and officers need not live or hold meetings in Nevada, or even be U.S. citizens
- Directors need not be stockholders
- Officers and directors of a Nevada corporation or LLC can be protected from personal liability for lawful acts of the corporation or LLC
- Nevada corporations may purchase, hold, sell or transfer shares of its own stock
- Nevada corporations may issue stock for capital, services, personal property, or real estate, including leases and options.
The directors may determine the value of any of these transactions, and their decision is final.
Why Choose an Attorney to Incorporate My Business?
While there are currently many non-attorney incorporation services now available which tout their low incorporation fees, there a number of very real reasons why you should choose a licensed Attorney to form your new business, including:
- Non-Attorney individuals and companies cannot lawfully provide you with legal advice concerning the formation and maintenance of your company.
- Many of these individuals and companies fees are so low because they do not provide all of the services needed to complete the incorporation and formation filing and process for full compliance with the applicable Nevada statutes. This may lead to your paying even more fees in the long run.
- Some of these companies and individuals, while advertising that they are “incorporating” a company for you, actually only form an entity with themselves shown as legal owner and then “sell” the consumer a corporate or LLC “shell”. Some unwitting consumers are then left on their own, not knowing that additional filings and procedures are required until they discover that their entity charter has been revoked or that they may be subjected to personal liability and are then hit with additional fees and costs to bring the entity into compliance (if the deficiencies are discovered soon enough).
- Many of these entities only provide you with non-customized Forms that may or may not fit your company’s specific needs.
- An Attorney, on the other hand, can assess your specific needs and provide you with valuable legal advice and a customized entity formation that may save you hundreds or thousands of dollars in the long run.
- An Attorney can provide you with ongoing legal advice and assistance to help ensure that your company continues to provide you and your associates with the personal liability shield that is critical to ensure that the individuals are not saddled with costly personal judgments and other problems.
- An Attorney can provide your business with ongoing legal advice and assistance to help you make important decisions that may greatly impact your company.
To form a Nevada entity either give us a call or email for an appointment for a free consultation. Or, to start the process to form a Nevada Corporation or LLC now, click on the following link to complete the online formation questionnaire.