Website design By BotEap.comDelaware has long been a popular state for US companies to incorporate for a variety of reasons. Recently, many have touted Nevada as the new Delaware, citing benefits such as better asset protection, tax savings, and increased privacy. Before you believe the hype, make sure you know the truth about incorporating in Nevada.

Website design By BotEap.comMyth 1: It is more difficult to remove the corporate veil

Website design By BotEap.comMany will claim that Nevada’s corporate laws make it more difficult to pierce the corporate veil or hold shareholders accountable for corporate actions. True, Nevada is reluctant to do so, but keep in mind that companies are likely to end up in the courts of the state in which they operate, not where they are incorporated. The court in your state of operation may choose to use its own state law instead of Nevada law as well, especially if it has no connection to Nevada except incorporation.

Website design By BotEap.comMyth 2: You save on taxes

Website design By BotEap.comWhile Nevada has no corporate taxes or individual state taxes, this does not necessarily translate into tax savings. Unless your business is based and incorporated in Nevada, you can only avoid state business income tax on income earned in the state. If your business is in Colorado, you will need to pay Colorado taxes.

Website design By BotEap.comMyth 3: You can be anonymous

Website design By BotEap.comAlthough the Nevada Secretary of State will not provide corporate or officer information to the IRS, the IRS can still access this information. Most of the information is required on tax returns anyway, and if there is a dispute or an audit, the IRS can subpoena the information it requires. You are even more likely to be audited if you are an out-of-state business incorporating in Nevada!

Website design By BotEap.comMyth 4: Nevada has a commercial court that rivals Delaware

Website design By BotEap.comMore than a decade ago, Nevada established its own specialized commercial court to rival Delaware’s court system. Unlike the Delaware commercial court, the Nevada court system does not publish written opinions, which means it lacks established case law interpreting corporate law. The court system simply does not have the predictability that makes forming a Delaware LLC or corporation so attractive.

Website design By BotEap.comWhile incorporating or forming an LLC in Nevada may be a good fit for your business, don’t assume it will automatically give you the advantages you need as an out-of-state entity. In many cases, the best option is incorporation in your home state or Delaware.

Website design By BotEap.comChoosing a state to form an LLC or corporation is an important decision and there are many ways to go wrong. If you are unsure, consult an attorney or corporate services company to determine the best course of action.