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Misconceptions About Incorporating In Nevada

Misconception #1: “Nevada Has No State Income Tax”

Indeed it doesn’t – and as long as your business is physically located and operated in the state of Nevada and your employees are legal Nevada residents, you’ll benefit. It won’t help you when it comes to registering in your home state as a “foreign entity” if your state does have an income tax, however.

Misconception #2: “Nevada Protects Your Privacy”

Only to a minor degree. Your shareholders are not listed in the records of the Nevada Secretary of State, but can be if you obtain a business license in Nevada – and definitely in your home state, regardless.

Misconception #3: “Nevada Doesn’t Exchange Info With The IRS”

True, but this only helps if your location and operations are confined to Nevada. If you have to register in any other state other than Texas however, those states DO have information exchange agreements with the IRS.

It’s That Old “Corporate Veil”

No doubt you’ve heard about “The Corporate Veil,” but you may not know exactly to what the term refers. Most people – especially in recent years – have come to believe the “Corporate Veil” is what allows multi-national corporations to abscond with billions of dollars of federal money or to raid employee pension accounts for the personal use of their CEO’s while never being held to account for any of it.

While this misconception is understandable in light of recent history, it’s hardly accurate. It actually goes back to the whole raison d’être for the formation of a corporate entity – which is to shield one’s personal assets and property from being seized to cover liabilities of the business. There are situations however in which a court may decide that it is indeed completely appropriate to hold shareholders or members liable for a corporation’s debts.

This can occur if a court decides that it would be unfair to a plaintiff to simply hold a corporation liable. This doctrine is called “Piercing the Corporate Veil,” and is usually invoked if there is evidence a shareholder attempted to pass personal liabilities on to the corporate entity. The “Corporate Veil” is the legal presumption of limited liability. Since the burden of proof is on the plaintiffs, these courts are highly reluctant to ”pierce the corporate veil,” and the decision to do so is usually made on a case-by-case basis.

Make sure you commit these things to memory so you don't think you're getting a benefit that you aren't really getting.

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