For years, Delaware has been considered to be the prime state to incorporate and still holds the number one position for registered corporations. However, what you may not know is that Nevada has become the choice of many business owners who want to form a corporation and has been closing the gap to number of filings with Delaware in recent years. Before considering your options, you should know the advantages you’ll gain if you start a business and incorporate in Nevada.

You may wonder if incorporation is the right choice for your business. Even if you’re a one-man operation, incorporating (or forming an LLC) may be the best business entity for you. The major reason to incorporate is that it protects your personal assets from business debts, helps keep the IRS off your back (because a sole proprietorship is more likely to be audited), a better marketing advantages (which sounds better as you introduce yourself, the owner operator or the CEO of your company) and helps you get more access to cash and capital!

If you’re looking for a state that allows more protection and levels of “hoops” to jump through for those looking to get access to your money, the small investment to start in Nevada and foreign register (or qualify) to your home state may be very much worth the extra investment. Keep in mind, that many may tell you to keep it simple, which of course is inversely related to asset protection!

Here are the advantages that you can benefit from if you incorporate in Nevada:

It’s Extremely Difficult for Anyone to Pierce Your Corporate Veil!

First, what exactly does “piercing the corporate veil” mean? When you form a corporation you must follow certain corporate formalities. If your corporation does not comply with all relevant corporate rules and regulations, keep accurate records of meetings by minutes, or if the corporation commingles funds, your board of directors, officers and shareholders could be held personally liable in the event of a lawsuit. “Piercing the corporate veil” refers to having personal assets exposed in a corporate lawsuit.

How does Nevada feel about this? Nevada has a tough attitude about piercing the corporate veil, which is why major corporations domicile in Nevada. Essentially, Nevada says that unless they can prove fraud, your corporate veil will not be pierced! That provides an awesome degree of protection for your personal assets.
Your Officers and Directors Can Be Indemnified.

In 1987, the Nevada Legislature passed a revolutionary law that permits corporations to place provisions in their articles of incorporation that eliminate the personal liability of officers and directors to the stockholders of Nevada Corporations.

Nevada Corporation Code allows for the indemnification of all officers, directors, employees, stockholders, or agents of a corporation for all actions that they take on behalf of the corporation that they had reasonable cause to believe was legal. This indemnification can include any and all civil, criminal and administrative action. These two laws can provide you with complete protection for the officers and directors of your Nevada Corporation, as long as they act prudently in their roles.

Delaware and a few other states soon adopted lesser versions of this law, but Nevada’s law remains among the most thorough and comprehensive in the country.

Always do your research to determine your best course of action. For many people, however, Nevada offers a great mix of protection and flexibility when it comes to protecting your assets in today’s difficult economic environment.

A mistake that people often make before forming their business entity is assuming that they must incorporate in their own state. There’s nothing further from the truth. Many people choose to incorporate their businesses in other states to gain more benefits, more protection, vs. “keeping it simple” by incorporating in their home state.

So, why incorporate in Nevada? Here’s the main advantage:

It’s extremely difficult for anyone to pierce the “Corporate Veil.”

Your personal assets would experience less exposure in a corporate lawsuit. This is especially important in our litigious society that is only going to get worse in today’s tight credit markets.

What exactly does “piercing the corporate veil” mean?

When you form a corporation you must follow certain corporate formalities. If your corporation does not comply with relevant corporate rules and regulations, keep accurate records of meetings by minutes, or if the corporation commingles funds, your board of directors, officers and shareholders could be held personally liable in the event of a lawsuit. “Piercing the corporate veil” refers to having personal assets exposed in a corporate lawsuit.

How does Nevada feel about this? Nevada has the toughest attitude about piercing the corporate veil, which is why major corporations domicile in Nevada. Essentially, Nevada says unless they (the poeple suing you) can prove fraud, your corporate veil will not be pierced! That provides an awesome degree of protection for your personal assets.

Hire a planner with experience. Don’t rely on word-of-mouth advice to get you through the process. Because many people make mistakes with the paperwork and fees, hire someone with experience who will not only walk you through the process but also walk with you. Find a company that has been in business for over 10 years, has nationally-known professionals that endorse the company on their web site, that have date testimonials, ideally video and audio also plus under the “about us” section on their web site, there is information about the “face” behind the company.

Once you’ve hired someone to help you form your corporation, you’ll need to have the following information:

1. The type of entity. There are at least 6 choices and your problem is you have an 83% chance of picking the wrong entity!

2. Your Company Name. Do a little research ahead of time to ensure that your company name is not used by another corporation. Otherwise, your company name will have to be modified to distinguish itself from other businesses, causing delays.

3. The name of the manager of the LLC or director of the corporation. This is typically required to file the article of organization or incorporation. Keep in mind, an LLC may be managed by managers or by members. Make sure who you work with understands the difference and what is best for you. Most do this improperly.

4. The address of the manager or director. This may seem simple but there are nexus (business presence) issues with this decision that should not be taken lightly.

5. Obtaining the EIN number. Who will sign the SS4 application and provide their SSN.

6. Type of Business. Are you going to operate a retail establishment, a service company, or another type of business? You’ll have to list the business type when you file your papers.

7. List of Officers and Their Addresses: President, Vice President (optional), Secretary, and Treasurer. (Note: One person may assume all of these offices within the corporation.) The good news about Nevada corporations is that officers don’t have to live in Nevada or be U.S. citizens. This provides greater flexibility when forming a corporation.

8. The steps to foreign register (qualify) to do business in your state of operations. That means more than likely the bank account, business license and office location will be the state where you conduct business even if you incorporate in Nevada.

Knowing how to incorporate in Nevada will prevent speed bumps that cause delays. Don’t gamble with your livelihood. If you want to get your business off to a running start, avoid the common filing mistakes so you can focus on building a lucrative, profit-making company.