WHEN DOING BUSINESS IN A STATE OTHER THAN NEVADA
Nevada Corporation leases its assets; i.e.; equipment, computers, fax machines, copiers to the corporation in the other state. The corporation in the other state grosses $100,000 per year. It pays $90,000 to the Nevada corporation for leases, leaving only $10,000 to be taxed in the home state.
Nevada Corporation Doing Business in Nevada to Achieve: - Full Asset Protection - Privacy - Tax Reductions. This is the corporation that will own all the assets and have a positive cash flow.
2nd CORPORATION doing business in home state.
Nevada Corporation filed in another state as a foreign corporation to do business in that state. Hires Nevada Corporation as a leasing company to lower total profit to be taxed in home state. There are two major reasons to establish a Nevada corporation if currently doing business in another state: Reduced home state taxes and Asset protection. This corporation does not have any assets of it's own and need not make a profit.
The best way to become judgment-proof is to arrange one's affairs so it appears that there is nothing to pursue (in terms of assets etc.). The best strategy for accomplishing this is to have two companies doing business with each other. For example, we have clients who have their business in the home state which can be a corporation filed in that state or a sole proprietorship. In addition, they have a Nevada corporation which is used to protect their assets by filing a lien on any real or personal property. (Either a mortgage or deed of trust on real property and a UCC-1 filing on personal property.) If someone was to sue our clients personally or their home state company, they would be unable to collect due to the previous lien on the assets. In Nevada, stockholders' identities are not revealed. The only thing revealed is the identity of the officers. If nominee officers are established for the corporation, absolute privacy is maintained.
Often the best solution is to have the operating entity lease its equipment from another, unrelated (by ownership) corporation. The next step could be to consider spinning off the existing business’ departments into separate corporations: the marketing department could become a separate marketing company, as an example. Almost all businesses must purchase some goods from outside sources, so why not deal with a friendly supply company, one over which you may exert some control from behind the scenes?
Not only will this approach severely limit the prospects for damage by prospective litigants, it will also, by and large, keep the IRS out of your affairs. Audit rates for the 2000 tax year continue to show (not surprisingly) that the smallest corporations have by far the lowest audit profiles. A corporation with less than $250,000 in assets had an audit rate of just .28% last year, while the rate for a corporation with $1 million in assets was more than TEN TIMES as high at 2.90% and the rate for the largest corporations skyrockets to more than ten times that figure at 30.51%.
The key to making this work is to treat each corporation as its own separate interest and to ensure that each entity always acts out of its own self interest. In so doing you ensure that each corporation has minimal exposure to lawsuits and IRS audits and the aggregate exposure is far, far less than it would be with a single, high-profile corporation.
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Silver Shield Services, Inc.
3315 Hwy 50
Silver Springs, Nevada 89429
(775) 577-4822 - Telephone
(775) 546-9955 - fax
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**Information on this site is not intended as and shall not be construed to be LEGAL ADVICE.
When dealing with legal matters, you should always avail yourself of the services of a qualified member of the Bar Association.