Nevada Corporation

There are some asset protection groups that sell Nevada corporations as the "definitive" asset protection tool. In fact, there are groups that sell franchises allowing someone with no experience or training to become an "asset protection consultant" and begin selling Nevada corporations to their friends.

What these groups propose usually focuses on the state of Nevada allowing bearer shares and having a higher degree of secrecy and privacy then other States. This claim is made based on the assumption that since the corporation has bearer shares nobody will know who the owner is. This is enhanced by the fact that the state of Nevada does give some protection to the identities of the ownership of the corporation. This may sound all well and good. However, it does not mean that the owners of the corporation can be kept concealed or that the corporation will offer any special protection to either the owners of the corporation or the assets held within it. In fact, there are absolutely no advantages to using a Nevada corporation for anyone who resides outside of the state of Nevada, or who wind up getting sued in a federal court. Even within the state of Nevada, the special benefits offered by the Nevada Corporation are highly questionable.

In addition, those individuals selling Nevada corporations more often then not fail to disclose the tax effects of what they are selling (this is not surprising, since, in most cases, they do not understand those tax consequences themselves due to a lack of both education and training on these subjects). Therefore, anyone purchasing a Nevada corporation from one of these "asset protection consultant" groups could be putting themselves at risk of doing something that will needlessly cause them taxes down the road.

Contrary to a popular mistaken belief, bearer shares are not specifically authorized by the Nevada corporation statutes. Therefore, it’s unknown whether Nevada law currently allows issuing of bearer shares, but certainly lack of specific statutory authorization means that there is no strong public policy in favor of allowing bearer shares, which are widely disregarded in nearly all other jurisdictions. Since subsequent court decisions may determine that Nevada does not allow bearer shares, and the Nevada legislature soon may clarify the issue by disallowing bearer shares, then bearer shares should be avoided. Without a doubt, the laws of other states that expressly disallow bearer shares may operate to disregard Nevada bearer Share Corporations in those states.

Bearer shares do not offer the level of secrecy that is claimed by the promoters. To begin with, creditors will enquire at a debtor’s examination by asking the question: "In the last three years, have you ever held shares in any corporation?" If you have held bearer shares during this period of time, you would be obligated to answer "Yes" or else you would be subjecting yourself to perjury.

Another problem with bearer shares is if the court cannot determine who holds the bearer shares, all it needs to do is just charge ownership to the person(s) directly involved with the nevada corporation. Therefore, if a person puts his signature on a corporation’s bank account, he can be deemed to be the corporation’s owner whether or not the bearer shares can be found. Also, if the court is unable to locate the bearer shares, it could just rule that the corporation be dissolved.

There is a wicked little secret about bearer shares: every time bearer shares change hands, it is either a sale or a gift that gives rise to tax consequences! If the bearer shares are sold instead of gifted, then there might be capital gains or losses. However the transaction is characterized, there is now an IRS reporting requirement, which means that IRS forms are due, which further means that a creditor would be able to track down those forms.

The outcome of all of this is that bearer shares are not a good thing. In fact, nearly all of the top asset protection planners warn that bearer shares are bad and should be avoided. Indeed, most of the better offshore jurisdictions have eliminated bearer shares because of the problems they cause people.