The Much Abused Nevada Corporation

Date: Feb 09, 2006

Last week I touched on Subchapter S Corporations (click here to view). It’s clear that they can save lots of self-employment tax, but tax-wise, they are next to impossible (for me) to understand, and aren’t able to be owned by an offshore Asset Protection Trust.

This week I have stocked up on my Pepto Bismo and Advil to prepare for the avalanche of hate mail I am sure to receive when I retouch on the much-abused Nevada Corporation (aka, the shady promoter’s tool of choice). It is a shame that I am still harping on this issue. You would think that the Nevada Secretary of State and Attorney General would have teamed up to stem the abuse of their Great State’s laws. After all, any State that can house the Consumer Electronics Show and the Porn Convention in the same week has got to be very special. For the time being, it appears that the regulators will continue to look the other way. (Could this have something to do with the income these corporations generate for the State?) Time will tell; but in any case, it is clear that the touting of good corporations for bad purposes is getting worse and worse every month. Despite my many warnings, the letters keep pouring in asking me to bless what I think is a scam. Hopefully, and for the last time, here I go again.

Nevada Corporations are fine for people who live or do business in Nevada. They are NOT a good vehicle for Asset Protection. Simple as that. Please reread the sentence in bold above.

Promoters of Nevada Corporations use what they often refer to as “bearer shares" to obfuscate ownership. They say no creditor can tell that you really own the assets in the corporation. This is pure BULL.

First, somebody owns the stock. If the "front man" they put in place to hold the stock actually owns the stock, then Mr. Frontman can take the assets of the corporation. This is black letter law, the holder of “bearer” stock is the owner....unless the “front man" is acting on your behalf. In this case the front man is your agent. This is simple to discover in a debtor's exam. (Remember, the corporation will likely show up on your tax return.) Remember, this debtors exam is under penalty of perjury (again, you either tell the truth or become Bubba's Roommate). So to preserve the Asset Protection you need to lie. If you tell the truth, the creditor gets the assets. If you lie and get caught it’s off to the slammer. Neither are attractive alternatives.

Second, don't forget the Full Faith and Credit Clause of the U.S. Constitution. Nevada is REQUIRED to recognize and ENFORCE judgments in all of the other 49 states without question.

Third, the promoters of Nevada Corporations push the tax-free nature of these entities. B-U-L-L. They forget the Unitary Tax rules. If the assets in the Nevada Corporation are really a Burger King in California; believe me, California will get its fair share of tax.

Finally, people who do this Nevada Corporation Scam, and then come to me for real Asset Protection once the judgments are starting to crowd them are always too late. They are the owners of the assets put into the Nevada Corporation, and any transfer of these assets into a truly protected environment is NOTHING BUT A FRAUDULENT CONVEYANCE.

Most people going to the purveyors of Nevada Corporations are looking for affordable Asset Protection. Instead of getting Asset Protection, they get a pile of bad advice that can ruin them.

Please, don't get suckered by this TOO GOOD TO BE TRUE SCAM. Before you purchase a Nevada Corporation from some under-qualified promoter (who may have paid nearly $10K for the right to sell you an ineffective $500 corporation for several thousand dollars) consult a qualified business lawyer in your state. Show him or her this letter. There is also a ton of good information, and most of the juicy gossip about the unsavory promoters of these scams on my bulletin board.

So, if you get bamboozled, it is your fault.

Now, bring on the hate mail.

ABOUT THIS EDITOR:

Rob Lambert, Founder and former law professor is considered to be foremost expert on tax compliant asset protection structures. A contributing editor to Lexus Nexus debtor creditors series of law books Rob's passion is implement client wealth plans that stand the test of time and hold up under duress.

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