Last piece in the Incorporating Puzzle
If you are sued in another state and you loose your case. If your assets are held in an LLC in Nevada, a judgment can only be satisfied by attaching a lien on the member's percentage of distribution from the LLC.
The courts of another state can not force a LLC to liquidate your assets held by the LLC in order to satisfy the judgment. They can only put a lien against any distributions you will be taking from that company. Our suggestion would be not to take any distributions.
|Compare Some States with Nevada||NV||NY||NY||TX||DE|
|States laws that Pierce Corporate Veils||FRAUD ONLY||Yes||Yes||Yes||Yes|
|Courts that Protect Corporate Veils||Yes||No||No||No||No |
|CorpNevadaOnline.com processing fees||Fraud Only||Yes||Yes||Yes||No|
|States that hold Officer Personally responsible||No||Yes||Yes||Yes||Yes|
|State laws provide for ease of incorporation through minimal filing requirements||Yes||No||No||No||Yes|
The number one reason to incorporate in Nevada is the protection it avails to the owners of the Corporation, be it a Stock held Corporation or a Membership held Corporation (LLC) the owners are not the appropriate party to a law suit. Nevada has by far the best laws to protect the owners. The corporate veil in Nevada has been pierced only twice in the last 26 years, and both cases involved outright fraud.
(Link to Statue)
NRS 78.257 imposes sanctions against the use of corporate records for purposes contrary to the interests of the stockholders.
Nevada corporations may issue stock for capital, services, personal property, or real estate, including leases and options. The Managers (for LLCs) or Directors (for Corporations) may determine the value of any of these transactions and their decisions are final. Because Nevada has no state tax and because budget-conscious Nevada does not keep much information on their own residents, or their corporations, it does not collect any information to share with the IRS. Other states freely exchange all of the information they have on every resident and corporation but Nevada has no reciprocity arrangement with the IRS.
The reason you still will want to headquarter your business in Nevada is Nevada protection laws will follow into your own state. If a law suit comes at your company they are going to have to bring that suit to Nevada. This is a very expensive proposition, most law suits will stop right there because of the expense. They will have to prove fraud, harder yet. In fact, there were other Nevada cases where the corporation didn't do resolutions, minutes and meetings, had thinly capitalized the company, commingled funds... and still, Nevada protected the corporate veil! Nevada is a pro-business state, meaning they strongly protect the business owner. Other states are more Pro Consumers.
In the last few years there has been an explosion of practicing lawyers in this country. In 1990 there were approximately 650,000 lawyers in this country, today over 1 million. What seems to be happening in this country as soon as an individual starts to get ahead the frivolous law suits come out of the wood work, when you can spill coffee in your own lap and win a settlement ( Mc Donald's Case), this may seem like a legitimate way to make a good living. When lawsuits are being considered what they (lawyers) are looking for is assets that are attackable. They are hoping you will just pay them off so they will go away, they really do not want to go to court. Meanwhile it costs approximately $5,000.00 just to answer a suit and that does not mean going to court. These will really cut into your bottom line, if too many of them show up it can put you out of business. If you have a visible business in your part of the country you may have to register your Nevada Corporation in your State in order to do business. Going through the process may well be worth the effort. This will usually cost somewhere between $300.00 and $700.00 to do the registration.
Nevada Is the Best State to Incorporate In
There are a lot of reasons to incorporate in Nevada. The number one reason to incorporate in Nevada is that the owners of the corporation are not the appropriate party to a law suit. Let me explain in detail exactly what that means.
Take for example a Chiropractor in California. Really nice guy, worked really hard to build his practice. He treated his patience's with kindness and care. He paid his malpractice insurance for years. He got a new bookkeeper and the insurance lapsed for 4 months. A slick lawyer got wind of the lapse. He was taken to court, of course, lost the suit, before he could even make it home from court they had come and taken his vintage cars, boat, and attached liens on his home. In California as in many other states when there are not enough assets in the business then they go after the personal property of the owners of the company to satisfy any judgments.
If he had held his assets in a Nevada Corporation the judgment would have been restricted to what that particular corporation held in assets. The lawsuit would have to be brought to Nevada and fraud would have to have been proven. The lawsuit may never have come, because it would have been much more expensive for the lawyers to pursue. When you have a lot equity then we think it is advisable to separate those assets out into different corporations so you don't have such a juicy target for any mishap that my come you way.
Here at CorpNevadaOnline.com we have come up with a way to keep you private, so when the lawyers are investigating your assets to see if it is worth the effort to pursue a new case, they will not find you at all. If a lawyer can not find anything to sell or attach often those frivolous law suits disappear.
So often it is after the fact when clients come to us. They are just recovering form losing everything.