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Incorporation / Anonymity
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CONTROL YOUR INCOME BY CHANNELING IT THROUGH YOUR OWN ANONYMOUS CORPORATION
You'd better realize that your "X" now owns a part of your future income. i.e. every time you improve your situation and make more money, just when you've got things rolling for yourself, financially and emotionally, the "X" rears her ugly head again and goes for a child support increase.
What's even more maddening is that she'll probably get it.
The only sure way to keep the system from raising your support and the "X" from causing you more pain in your life is for them never to find out what you're really doing.
If you channel income through your own corporation and your own private retirement plan, then have your own corporation pay you a salary with pay stubs so that you look, smell and feel just like the next guy walking into court, the system will most likely leave you alone.
THE BEST PART IS THAT THEY PROBABLY WON'T EVEN THINK TO ASK ABOUT SUCH A STRUCTURE.
Your Name Never Appears Anywhere in the Public Records, your name is not on any Accounts, ANYWHERE, and your completely secure.
SOUND TOO GOOD TO BE TRUE. TRY US!!!
NBFR ORDER FORM
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IS ANONYMOUS INCORPORATION LEGAL?
It certainly is! Even a former Supreme Court Justice stated that a U.S. citizen has the right to structure his financial affairs in such a manner as to pay the least tax and to protect himself from agencies and persons that would take it.
Child Support is a tax! Don't kid yourself.
You have an obligation to support your kids; however, that does not necessarily mean that you have to give Mom money so that she can spend it on the kids.
Take Control Yourself!!!
A coroporation will actually allow you to put away some money for yourself and for your kids; perhaps, in a college fund. All Without Mom Knowing What a novel idea!
Once a court of proper jurisdiction establishes alimony or child support requirements, the person making such payments might wish to establish a Nevada corporation issuing bearer shares to avoid addition support appeals from future income. Persons who wish to maintain a low profile in their business dealings. Many wealthy and prominent people want to avoid having their names associated with high-profile investments. Bearer shares are an ideal form of ownership for such individuals Persons who wish (or may need) to remain anonymous to close a business deal. When personal relationships could otherwise jeopardize profitable business dealings, it may be possible to use a corporation with bearer ownership to close the deal. I know of a wealthy dentist who wanted to buy a condominium complex he was living in. Unfortunately, he had developed a poor relationship with several of the other owners in the complex, and disliked him so much they refused to sell. Along came a Nevada corporation, which made an offer slightly less than the dentist's and the deal closed quickly. The more the dentist complained about the "low-ball" offer, the more the others wanted to sell.
NBFR ORDER FORM
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ANONYMOUS VISA
There is nothing better than accessing money that is earned by your corporation with a VISA card from any ATM in the world. What could be simpler?
Your Nevada Corporation contracts with people that you normally work for as a sole proprietor and you become an employee of the Corporation. You receive paychecks and you will have pay stubs if and when you go to court for child support purposes.
Any left over money stays in the corporation and you can pull it out in CASH!
Your Corporation can purchase Real Estate, it can have its own "Self-Directed 401K Retirement Plan", you can purchase every thing that you normally would buy in your own name; but, now, it's protected within the Corporation.
NBFR ORDER FORM
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ANONYMOUS CHECKING ACCOUNT
This account cannot be traced to you; however, you have control of the account. This is a huge bank with on-line banking within the U.S.; a name you will instantly recognize.
NBFR ORDER FORM
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SELF DIRECTED 401K
Many people do not know that you do not have to invest in stocks and have a traditional broker invest your retirement funds. You can invest these funds yourself and in "non-stock-type" investments.
You can purchase your own home with monies from your retirement funds and any other asset or investment that you can think of.
NBFR helps you with this process.
NBFR ORDER FORM
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BENEFITS AND SERVICES OF NBFR
NBFR can price and help with every phase of an entire anonymous financial planning program. $1,950.00 is our total price for the Nevada Corporation, the anonymous VISA, the anonymous checking account and complete consultation to step
you through everything you need to become independent and with peace of mind.
NBFR services include consultation about 401K's, how to purchase Real Estate anonymously, transfer of present assets into corporate name, anonymous stock and commodity trading account, transer of car titles, tax structuring to save money through your corporation. And, Much, Much, More!!!
NBFR ORDER FORM
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THE CORPORATE PACKAGE - ADVANTAGES OF INCORPORATING IN NEVADA
Nevada
Nevada has spent more than a decade developing the infrastructure to support its claim as the incorporating capital of the West. Instead of resting on its laurels, Nevada has become much more determined to establish itself as a leader in incorporation, as evidenced by the complete revision of Nevada's Corporation Code in 1991 that makes the entire incorporation process quicker and more efficient, with greater liability protection than ever before. Approximately 1,500 corporations are formed every month in Nevada, which is three times higher than in 1985.
Because of Nevada's pro-business attitude, Inc. Magazine and Money Magazine have rated Nevada #1 among all States in recent years for favorable business climates. In the last decade, Nevada has clearly established itself as the "Corporation Capital of the West," and has shown significant annual growth in the number of new businesses that incorporate there each year. And, Nevada's legal system, while not as experienced as Delaware's, has naturally grown to accommodate the need for establishing legal precedents that support the state law.
Nevada offers many advantages as a corporate haven:
1. Nevada has no state corporate taxes.
2. Nevada has no franchise tax.
3. Nevada has no tax on corporate shares.
4. Nevada has no personal income tax.
5. Nevada provides total privacy of shareholders.
6. Nevada is the only state without a formal information-sharing agreement with the IRS.
7. Nevada is the only state that allows for the issuance of "bearer shares."
8. Nevada has minimal reporting and disclosure requirements.
9. Nevada has nominal annual fees.
10. Nevada allows for a one-man corporation.
11. Nevada has established case law that prevents easy piercing of the corporate veil.
12. Corporate officers and directors can be protected from any personal liability for their lawful acts on behalf of the corporation.
13. Stockholders, directors and officers need not live or hold meetings in Nevada, or even be U.S. citizens.
14. Only the names of the officers and directors are on public records. No other information, listings, or minutes of meetings are filed with the State.
15. There is no minimum initial capital requirement to incorporate.
16. Nevada corporations may issue stock for capital, services, personal property, or real estate. The directors alone may determine the value of any such transactions, and their decision is final.
Nevada's Corporation Code has been criticized by some as too pro-management, offering far too much flexibility in maintaining the corporation's affairs. Critics have said that the law in Nevada is not concerned enough about the rights of stockholders or employees. However, since the 1991 version of the Corporation Code was adopted, Nevada has experienced a 20% increase in the number of corporations filed in the state.
Most of these corporations are being formed by small companies, where the stockholders and the management are the same. These people are concerned very little with protecting their rights as a stockholder, since they also manage the company and receive all of the benefits of Nevada's liberal Code.
From the Reno Gazette-Journal, Monday, April 29, 1991:
Incorporating becomes big business for Nevada
"They come from all over: the busy streets of New York, the snowy slopes of Colorado, the oil fields of the Yukon, and they all want the same thing: the painless, cheap and anonymous security of Nevada's business world.
"Scores of companies fill out a few documents, list a few officers, pay a nominal fee and presto ) a new corporation is born. For instance:
"A New York City cab company has established 50 Nevada corporations -- one for every two vehicles in its 100-taxi fleet. If the company gets sued, its liability is limited to the value of individual properties, just two cabs, unless the plaintiff wants to file lawsuits against 50 different companies.
"Some ski resorts have followed the same principle, setting up corporations for each ski lift, lodge and snack bar. A major petroleum company set up Nevada corporations for each of its 100 Alaska Oil wells. 'It's really the idea of making a new basket, every time you have an egg you want to insulate,' said one Nevada incorporation expert.
"Several entertainers have also started their own corporations. Rock stars Madonna, the Artist Formerly Known as Prince, Michael Jackson and Paul Simon all reportedly have Nevada corporations, as do Chevy Chase and Rodney Dangerfield. Some have their big-money salaries paid to accounts in Nevada, where there is no income tax or corporate tax, and the entertainers draw a salary from the corporation. "They buy boats, cars and take trips to Europe and everything," said Nevada businessman Brian Foote, who helps out-of-staters set up Nevada corporations. "They have the corporation buy for them."
"All of this is made possible because Nevada lawmakers drafted its liberal corporation laws over the past several decades, said Cyndy Woodgate, state deputy secretary for corporations.
"Officials didn't want to be hard-nosed about business coming to Nevada, Woodgate said. "And not being restricted here, they're able to come here and do business. We like that fact."
"There are several benefits of having a Nevada corporation. These include low filing fees, minimal information requirements, and no standard corporate tax. Most other states, including California, have a tax.
"To make matters even better, Nevada is the only state without a reciprocal agreement with the IRS to exchange tax returns. This is especially attractive to some corporations or individuals who want to legally protect their privacy.
"With all these advantages, it's sometimes feasible for a single person or company to set up several Nevada corporations. The same thing would be a paperwork nightmare in California, where basic individual filing fees are up to or more.
"The liberal laws have spawned their own growth industry: businesses that specialize in helping other businesses set up corporations. And business is booming, in part because it's getting more complicated and costly to do business in other states.
"At least for now, Nevada remains the second most popular state for incorporating on a per capita basis. The leader is Delaware, but local corporation makers aren't impressed: Nevada, they say, has several benefits Delaware doesn't have, like privacy, no franchise taxes and other benefits."
LIABILITY PROTECTION
"The number of lawyers confounds all belief in the land of the fee and the home of the brief." - Leon Frielich
There is a national trend developing where people are steadfastly refusing to serve on the board of directors of corporations because of their exposure to stockholders and the public. Gone are the days in which someone tries to embellish their resume by listing all of the corporations for which they serve as a director or vice-president. People are slowly realizing the liability exposure that they have in those situations.
In 1987, the Nevada Legislature passed a revolutionary law that allows corporations to place provisions in their articles of incorporation that eliminates the personal liability of officers and directors to the stockholders of Nevada corporations. Delaware and a few other states soon adopted lesser versions of Nevada's law, but Nevada's remains among the most thorough and comprehensive in the country.
Contained in the Nevada Revised Statutes (78.037), the law in part reads as follows:
"The articles of incorporation may also contain:
1. A provision eliminating or limiting the personal liability of a director or officer to the corporation or its stockholders for damages for breach of fiduciary duty as a director or officer, but such provision must not eliminate or limit the liability of a director or officer for:
(a) Acts or omissions which involve intentional misconduct, fraud or a knowing violation of law"
In Nevada, the officers and directors of the corporation are the only people listed on public records, so they have the only real exposure to the outside world. As stated above, stockholders can be indemnified as well, although that is secondary protection to the fact that no one can find you on public records in the first place. How can somebody sue you - or at least collect against you - if they can't find you?
Additionally, Nevada's 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 civil, criminal and administrative action. (See NRS 78.751.) These two laws can provide comprehensive protection for the officers and directors of Nevada corporations as long as they act prudently in their roles.
In product liability cases, the damages are categorized as one of two types. The first type is referred to as "compensatory," which are intended to compensate the injured for some loss, which can include economic (such as lost income, medical bills, etc.) or noneconomic (for example, pain and suffering).The second type of damages are called "exemplary," also known as "punitive." Exemplary damages are imposed to punish the wrongdoer for conduct which by clear and convincing proof is shown to involve oppression, fraud, or malice, either express or implied. These damages are designed as a deterrence to others.
Tort Reform
Nevada has joined a group of states that have enacted tort reform legislation in response to the increased cost of doing business resulting from potential liability. The goal of tort reform is to reduce the exposure of businesses and their insurers. The key features of Nevada's legislation are provisions which limit exemplary damages and abolish joint and several liability except in certain cases.
Before the tort reform legislation, it was common for courts to award exemplary damages three to five times greater than the compensatory damages. Nevada statute now limits exemplary damages to an amount no greater than ,000 when the amount of compensatory damages is less than ,000. These limitations do not apply to situations involving insurer bad faith, the release of toxic substances, or product liability.
The other significant change in Nevada law is the abolishment of joint and several liability. Joint and several liability means that if a judgment is entered against several defendants, they are each equally liable for the full amount of the judgment, without regard to their relative fault in causing the damages. Nevada now requires the court to assign a percentage of fault to each defendant, from zero to one hundred with the total equal to 100 percent. Each defendant found liable is required to pay a share of the total judgment no greater than his/her percentage of fault.
TAXES
"Anyone may arrange his affairs that his taxes shall be as low as possible; he is not bound to choose that pattern which will best pay the Treasury; there is not even a patriotic duty to increase one's taxes." - Learned Hand, in Helvering v. Gregory.
All US corporations are subject to federal income tax liability. Although there are many strategies involving the corporation that may reduce the federal tax liability, the state of incorporation is not a direct factor in reducing federal taxes. However, some strategies that will reduce federal income taxes for corporations may require the use of a corporation from a specific jurisdiction, such as Nevada, due to several factors that are inherent in Nevada corporations.
State Corporate Income Tax
California has a state corporate tax rate of 9.3 percent, with a minimum tax of per year. Arizona has a tax of 9.3 percent on all taxable income over ,000. New York's tax rate is 9 percent, (10 percent on unrelated income) with a minimum required tax of per year, in addition to taxes levied by local jurisdictions (New York City imposes an 8.85% corporate tax). Even Delaware has a corporate tax of 8.7 percent and a minimum per year franchise tax.
The difference in tax liability becomes immediately apparent when looking at state corporate tax rates. The rate of tax among the forty-five states that have state corporate income tax, ranges from 1 percent (Arkansas' corporate tax on the first ,000 of income) to 12.25 percent (Pennsylvania's corporate tax). Many states have additional surtaxes, and allow local governments to assess their own corporate taxes on top of that.
Nevada is one of only four states with no corporate income tax. Additionally, Nevada has no franchise tax, no taxes on corporate shares, and no succession tax. This type of tax structure is made possible in Nevada by a state economy centered in three major industries, namely; (1) gaming, (2) tourism, and (3) mining.
The revenue generated by these industries has historically paid for a substantial portion of Nevada's budget needs. Any visitor to the Las Vegas Strip can testify that Nevada's entertainment industry has poured billions of dollars into protecting it's title as the entertainment capital of the world. Besides the gaming taxes generated on the casino floor, the millions of visitors add substantially to state coffers each year in sales revenue from purchases made during their visit.
So, by incorporating in Nevada instead of California and with careful structuring that distinctly separates the Nevada source income from the California source income, you can create an entity that has it's tax domicile in Nevada. This could save the business ,300 in state corporate income taxes on every ,000 of taxable income. What's more, your corporate structure would be in complete compliance, and legally justified.
Remember, there is a difference between "tax avoidance," which is perfectly legal, and "tax evasion," which is very illegal. Tax avoidance is avoiding situations which are taxed, while tax evasion is failing to pay taxes that are due.
And just as important, Nevada has been fiscally conservative throughout its history. Nevadans have never had high regard for taxes. So much so, that several years ago the Nevada legislature approved a measure that made a state personal income tax unconstitutional.
Nevada's Business License Tax
The best example I know that demonstrates the difference between the two is in consideration of a toll bridge. Crossing the toll bridge without paying the toll would be evasion, while choosing another route, even if it adds a few miles to the trip, is simply avoidance. There is nothing illegal or immoral about it.
The one business-related tax that you should be aware of may not even apply to your Nevada corporation. Effective July 1, 1991, the tax is often called the Nevada Business License Tax, which is based on the average number of employees the company has on the payroll during each quarter of the year. The tax is paid quarterly by every person, corporation, partnership, or proprietorship that conducts an activity for profit in Nevada. The only exempt companies are nonprofit organizations and government entities.
Only businesses that have employees working in Nevada are subject to the tax. If you don't have employees, the tax does not apply. Independent contractors are not considered employees of the company, and are liable for their own tax under the law.
The procedure for administrating and collecting the tax is as follows: an application is mailed to all new businesses by the Nevada Department of Taxation within weeks of incorporating or securing local business licenses. The original application must be accompanied by a .00 filing fee, and a current list of corporate officers and directors. All new businesses must return the application, if for no other reason than to say that the company had no employees.
The tax amounts to per employee per year. To dissuade the critics of this tax, who properly complain that it produces a negative reward for hiring new employees, the tax is now based on the number of hours worked by employees, instead of the number of employees hired. The total hours worked are then divided by the number of hours the state thinks a full-time employee should work each quarter, and the result is the number of employee-equivalents that the business has.
PRIVACY
"The makers of our Constitution undertook to secure conditions favorable to the pursuit of happiness. They recognized the significance of man's spiritual nature, of his feelings and of his intellect. They knew that only a part of the pain, pleasure and satisfactions of life are to be found in material things. They sought to protect Americans in their beliefs, their thoughts, their emotions and their sensations. They conferred, as against the Government, the right to be let alone - the most comprehensive of rights and the right most valued by civilized man." - Louis Brandeis, in Olmstead v. United States.
For many people, privacy is the primary issue in their financial life. It seems that in our society, so bent as it is upon litigation and lawsuit, the less people know about your assets, the better off you are. It is no coincidence that people without significant assets do not get sued nearly as often as those who are perceived as having "deep pockets." Individuals with any assets at all should anticipate the possibility of being sued during their lifetime. This is the very reason many people incorporate their business activities.
From the Reno Gazette Journal, Monday, April 29, 1991:
Silver State's regulations allow for 'hidden' firms
"Taking advantage of a new Nevada law, some Silver State corporations now are able to withhold from the public the location of their principal offices.
"But a top official in Nevada's Secretary of State's office said she believes the new law isn't causing problems, although the number of hidden corporate sites is unknown.
"Under the previous regulation, corporate papers available to the public were required to list the location of a corporation's principal office. That's not required under the new rule, which mandates only that a corporation list the address of its Nevada resident agent.
"The updated law requires that the resident agent keep a record of the corporation's principal office address. But there's no requirement that a resident agent reveal a corporate office site, except under court order.
"However, corporate directors must list their names and addresses - information that sometimes can be used as a clue to the area a principal office is located, said Cyndy Woodgate, deputy secretary of state.
"Nevada's corporation law remains liberal, and finding a corporation "is no easier than it was before," she said. That's partly because a Nevada corporation doesn't necessarily have to conduct business, and its address can be listed as a post office box.
"The rule changes were approved by the 1991 Legislature."
Frivolous lawsuits are expected and planned for by companies across the country. Because it is widely recognized that insurance companies regularly settle claims - even frivolous and unsubstantiated claims - rather than deal with the expense of, or risk the decision of the court, we have become a suit-happy society.
To protect your assets from this disturbing trend, you need a specific plan of action that isolates your assets from yourself. If someone has no reason to believe that you have access to a million dollars, it is not likely that someone would pursue a million-dollar judgment against you. If you keep your assets private, you will greatly reduce your chances of being sued. Certainly no attorney would work on a contingency against you unless they see some way of getting paid. Suing poor people has never made an attorney rich.
The Nevada corporation offers many ways to protect your privacy as a stockholder. To appreciate how this is possible, it is necessary to understand that there are essentially five ways to identify the stockholders of a corporation:
1. Call the Secretary of State's office (or it's equivalent) where the corporation was formed. In some states, the Secretary of State requires that a list of stockholders, including their capital contribution and the value of their stock be on file. Often, this information is available over the telephone.
2.Obtain a copy of the corporation's tax return in that state. Every state that has a corporate income tax or franchise tax requires that the return be filed on a state-approved form. It is common for the state income tax return to require a list of stockholders, (particularly when that state also has a personal income tax.) This is difficult to get over the phone, but can be accessed, depending upon the state's policy, either through the mail to any individual who asks, or to anyone who has a subpoena for the record.
3.The corporation's resident agent in that state is required to have information on file regarding the ownership of stock. Usually, this means that the corporation is required to provide the resident agent with a copy of the stock ledger for file. This is not available to just anyone, but a subpoena will have immediate access to it.
4.The corporation itself maintains the original of the stock ledger. This ledger contains all the information regarding the amount, type and value of stock owned by each stockholder. A subpoena can get to any corporate record.
5.The corporate officers or directors can be deposed under oath about their direct knowledge of the ownership of the corporation.
It can be difficult or impossible to find out who the stockholders are of a Nevada corporation using any of the methods described above. Let's discuss each of these avenues individually.
First, the only filing required of a Nevada corporation to the Secretary of State is an annual list of officers and directors. This list represents the only information that the Secretary of State will have regarding the ownership and management of the corporation. This list is due within 60 days of incorporation, and annually after that.
Although there is room on this list for many names, only five lines need to be filled out. The required offices that the Secretary of State must have on file include the president, the secretary, the treasurer, at least one director, and resident agent. The most significant thing about that is the fact that one person may serve in all of those capacities, and is not required to be a stockholder.
If someone calls the Secretary of State in Nevada and requests information on a corporation, they will learn several things. They will learn whether or not the corporation is in good standing with the state. They will learn the names of the president, secretary, treasurer, and director (as well as any additional officers which may have been reported, such as vice-president and/or additional directors). They may learn that all of those positions are filled by the same individual, which usually suggests a one-man corporation, or by several different individuals. They may discover that the officers and directors appear to have residency in the US, or that conversely, they appear to be citizens of a foreign country. They have also discovered who the resident agent is, but we'll get to that later.
What they could not learn is significant:
The Secretary of State could not reveal information regarding whom the stockholders are, or even how many exist, or how much stock is issued;
If the list of officers and directors was filed, for instance, on October 1st, it only represents the officers and directors of the corporation on that date. It is theoretically possible that the corporation had a meeting on October 2nd, where new officers and directors were elected. The new officers and directors would not be on public record for a year, if then.
The Secretary of State could not tell what assets the corporation owned, how much capitalization exists, or what their value was, and; The Secretary of State could not say if the officers and directors had changed since the last list was filed, since filing the list is only required once a year.
The corporation could conceivably call another meeting the following September and put the original officers and directors back into office in time for the next annual filing. So, you have no guarantee that the names you found have any relevance to the current situation.
Because Nevada has no corporate income tax, or the inherent bureaucracy that such a tax creates, there are no state corporate tax returns to look at. The only document the Department of Taxation has, is a filing form for the Nevada Business License Tax, which is not immediately available as a public record, and if it were it would only disclose the number of hours worked by employees of the company.
Let's assume the resident agent for the corporate records has been subpoenaed for the records it has in its possession relating to this particular corporation. The Nevada resident agent is not required to have a copy of the actual stock ledger on file as is required in most states, instead it is merely required to have a statement that provides the name and address of the person who has the stock ledger in their possession. The actual stock ledger could be in Sri Lanka, Swaziland, or Senegal.
The law does not require the stock ledger to be in Nevada at any time. If the corporation so desired, it could force a potential litigant to spend a lot of time and money to pursue that information. You would have to be asking yourself how much trouble this is all worth.
The corporate secretary is another potential source of stockholder information. This person has no legal obligation to you to reveal any information at all about the stockholders of the corporation. In fact, the corporate secretary is not required, or even allowed, to provide that information even to another shareholder of the company unless the shareholder controls enough voting power to force the issue.
NRS 78.257 provides that any stockholder who owns at least 15% of the issued shares of a corporation has a right to inspect all books and records, but must bear the costs of such an inspection. Minority shareholders with less than 15% ownership do not enjoy this right.
The right for judgment creditors to access a corporation's stock ledger was removed by the Legislature in 1993.
In essence, a potential judgment creditor does not seem to have the ability to access corporate records or documents to suit his interest, unless he is a stockholder, or a criminal investigation warrants it. If a potential creditor attempts to obtain and use these corporate records for any interest other than a shareholder's, he could face civil penalties.
Beyond those limitations, ultimately the stock of the Nevada corporation may have been issued as bearer shares. This means that they may be issued and recorded on the stock ledger as having been written to the "bearer" of the certificate. Perhaps the shares were first issued to the trustee of a voting trust, or care of an attorney, who exercises attorney/client privilege. In any event, the corporate secretary may have no direct knowledge regarding who currently possesses those shares.
BEARER SHARES
Nevada is the only state that allows corporations to issue stock to the "bearer," which is very much like writing a check to "cash." The person who controls the bearer certificates, or has the shares in their possession, technically has the power to redeem those shares as the beneficial owner. As a negotiable instrument, it may be difficult to determine how many times the stock has changed hands since it was first issued.
The use of "bearer shares" to own and control a Nevada corporation has been touted in seminars, newspaper advertising, and promotional brochures of many Nevada-based incorporating companies. Bearer shares are generally considered to be an attractive solution for individuals who desire to own or control assets or business activities, while maintaining a high degree of financial privacy. It is true that privacy can be accomplished through bearer share ownership, however there are many issues which are broadly misunderstood regarding the use of bearer shares.
HOW BEARER SHARES ARE ALLOWED
Most states base their corporate law extensively on the Revised Model Business Corporation Act as developed by the Committee on Corporate Laws of the American Bar Association. It should surprise no one, then, that there are amazing similarities in the Corporation Codes of the various states. However, because the Model Act has been refined and modified over time, and because of the stubborn independence of the various states not to conform entirely to the Model Act, each state has developed its own eccentricities that set it apart from the others.
In Nevada's case, one area in which it separates its Corporation Code from the Model Act is in the information required on the stock certificate of a corporation. Under the Model Act, for instance, a stock certificate is required to contain: 1) the name of the issuing corporation and the state under which it is organized; 2) the name of the person to whom the stock is issued; and 3) the number and class of shares and the designation of the series, if any, the certificate represents.
The Model Act does not contemplate or allow the use of shares issued to bearer.
The Nevada Revised Statutes (NRS) reads differently, and by omission of the language of the Model Act, creates an opportunity to issue shares of a Nevada corporation to "The Bearer". NRS 78.235 (1) reads in part as follows: "every stockholder is entitled to have a certificate, signed by officers or agents designated by the corporation for the purpose, certifying the number of shares owned by him in the corporation."
In other words Nevada law specifically only requires two things: 1) the name of the corporation, and; 2) the number of shares represented by the certificate. According to an attorney with the Nevada Attorney General's office assigned to the Nevada Secretary of State's office, Nevada is the only state with this language. Since the name of the shareholder is not specifically required on the certificate, there has been broad use and acceptance of bearer shares in the State of Nevada for many years.
Even so, officials with Nevada agencies such as the Attorney General's office, the Securities Division and Corporation Division of the Secretary of State's office are reluctant to take an official position one way or the other on bearer shares. There are no Attorney General's Opinions on this issue, and surprisingly, there is absolutely no case law on the subject. The most positive affirmation I have received on the viability of bearer shares came from Mr. John Cunningham, an attorney with the Securities Division who confirmed that bearer shares could be used as long as the corporation was not required to qualify for a public offering
WHY BEARER SHARES ARE USED
There are two clear reasons why a corporation would issue bearer shares: First, as a tool to achieve total privacy in corporate ownership due to the fact that true ownership is extremely difficult to determine, and; Second, as a vehicle to provide for convenient transfer of ownership interests. Let's discuss these individually.
Privacy
There are only two tangible sources of information on ownership of a Nevada corporation: the stock certificate, and; the stock ledger. The stock ledger has its own legal requirements under Nevada law. The ledger must contain, in alphabetical order, the names of the stockholders, their residence address, and the number of shares owned by each. This list must be revised annually, and would be a significant document for a legal adversary to obtain.
However, Nevada law provides a statutory barrier to getting and using information on the stock ledger that includes its own penalties. As discussed above, NRS 78.257 provides that any stockholder who owns at least 15% of the issued shares of a corporation has a right to inspect all books and records upon five days notice, but must bear the costs of such an inspection. But subsection 3 of that statute states that:
"Any stockholder or other person exercising (these rights) who uses or attempts to use information, documents, records or other data obtained from the corporation, for any purpose not related to the stockholder's interest in the corporation as a stockholder, is guilty of a gross misdemeanor." (Emphasis added.)
In other words, the penalty for using corporate information for any other purpose than to have a stockholder defend or demonstrate his or her interest in the corporation is up to one year in the county jail and up to a ,000.00 fine. Clearly, a non-shareholder in a Nevada corporation has no legal right or authority whatsoever to view the stock ledger. (However, the burden of proof, in the cases of Roney v. Buckland, 4 Nev 557 (1868) and Wayman v. Torreyson, 4 Nev 619 (1868), falls on the corporation to prove improper motivation for such a request.
With those protections in place, the only other tangible source of ownership information is found on the stock certificate itself. A bearer certificate, even if obtained, could only be considered circumstantial.
Individuals who attempt to use bearer shares should exercise extreme caution to avoid the potential for civil or criminal liability. When in the discovery phase of litigation, there is no guarantee that the court will not require full disclosure of stock ownership. In a criminal case, a grand jury may do likewise, although materials submitted to a grand jury are confidential unless presented in support of a criminal indictment.
Examples of individuals who might use bearer shares include:
Persons contractually obliged not to compete in a particular business. Such persons may establish a Nevada corporation issuing bearer shares to enter into that market, recognizing the possibility of civil litigation if their employer or former employer learns of their indirect involvement. Persons engaged in contested divorce or family support proceedings. Once a court of proper jurisdiction establishes alimony or child support requirements, the person making such payments might wish to establish a Nevada corporation issuing bearer shares to avoid addition support appeals from future income. Persons who wish to maintain a low profile in their business dealings. Many wealthy and prominent people want to avoid having their names associated with high-profile investments. Bearer shares are an ideal form of ownership for such individuals Persons who wish (or may need) to remain anonymous to close a business deal. When personal relationships could otherwise jeopardize profitable business dealings, it may be possible to use a corporation with bearer ownership to close the deal. I know of a wealthy dentist who wanted to buy a condominium complex he was living in. Unfortunately, he had developed a poor relationship with several of the other owners in the complex, and disliked him so much they refused to sell. Along came a Nevada corporation, which made an offer slightly less than the dentist's and the deal closed quickly. The more the dentist complained about the "low-ball" offer, the more the others wanted to sell.
Transfer of Ownership
Most of the confusion surrounding bearer shares has to deal with the issue of transfer of ownership. A bearer instrument is negotiated differently than an instrument made payable to order. If an instrument is made payable to the order of John Doe, it is negotiated by delivery with any necessary endorsement. If an instrument is made payable to bearer, it is negotiated by delivery. It is commonly believed that bearer shares allow you to transfer ownership of a Nevada corporation in complete privacy, without any adverse impact. Three important facts must be established on this topic:
1. A stock certificate is not stock itself. The stockholder may own the stock with or without the stock certificate. The Nevada Attorney General has published a formal opinion on this subject (AGO38). The certificate is merely a piece of paper that indicates ownership. Because Nevada does not require corporations to issue certificates at all, it would be foolish to assume that possession of the certificate equals ownership of the shares.
2. The Nevada Revised Statutes (78.240) specifically state that shares of stock are personal property. So, all rules, regulations, and applicable taxes that would otherwise apply to transfers of personal property will also apply to transfers of bearer shares. Bearer share certificates, like personal property, may be stolen, borrowed, obtained under false pretenses, lost, copied, sold, inherited, bought, willed, etc. My car is personal property also. On occasion I have lent my car to a friend. Simply because he was in possession of my car during that time did not mean he was the owner.
3. Nevada case law requires a transfer of stock to be registered upon the corporation's books before the transfer is valid against the corporation. This is done to protect corporate officers in determining ownership of and the right to vote corporate shares. (61 Nev. 431, 132 P.2d 605. (1942))
So, can bearer shares be used to transfer ownership of a Nevada corporation? Absolutely. But the new owner must register his ownership with the corporation before the corporation can grant ownership rights, including dividends. And, the transfer may trigger other things, like federal gift and estate or capital gains taxes.
This issue is widely misunderstood. I recall attending a seminar on corporate strategies in Carson City several years ago where the founder of a large incorporating company suggested that he could legally avoid disclosing his ownership of corporate stock, even if he were called to testify in court under oath. His solution was to have the stock issued to bearer, and give the stock certificate to someone seated next to him immediately prior to being called to the stand. Then, he said, he could testify that he did not legally own the stock, and upon returning to his seat receive the certificate back.
Over one hundred people were in attendance at that seminar, and heard an "expert" in the field describe how to perjure oneself. Perhaps he did not know the three important rules outlined above. I should not be surprised, because none of the real experts contacted by my office in preparation for this article could offer anything more than a personal opinion on how bearer shares are handled.
The fact that there is so little published or known on the issue of bearer shares could be interpreted as unsettling evidence that we are wandering in the "great unknown". But keep in mind that there is no statute that disallows its use, and no case law that invalidates it.
Recently, I called six prominent Nevada attorneys, including the head of the business law section of the Nevada State Bar, with specialties ranging from business law and contracts, to litigation and bankruptcy, and asked them what they could tell me about bearer shares. No one admitted any knowledge of bearer shares, besides the confirmation that they were used. Three attorneys in the Nevada Attorney General's office claimed only a passing acquaintance with bearer shares. The head of the Securities Division and three other administrators in the Secretary of State's office could offer us nothing.
HOW TO ISSUE BEARER SHARES
If a corporation chooses to issue bearer shares, I believe the following formula can be effective:
Step One. Hire a reputable attorney who understands the need for strategic planning. If the attorney can form the corporation in Nevada directly, let him do it. If an incorporating company/resident agency must be used, let the attorney make all necessary arrangements and communications.
Step Two. Have the attorney hire nominee officers and directors who have no personal contact with the shareholders, but receive all instructions through the attorney. This way the testimony of officers and directors relative to their personal knowledge of corporate ownership is limited.
Step Three. In the organizational meeting of the corporation, the nominee officers and directors issue stocks to "bearer certificate" in increments provided in instructions from the attorney. In the stock ledger, the transaction is recorded with the stock being issued "in care of" the attorney.
Step Four. The stock certificates and stock ledger are forwarded to the office of the attorney. The certificates are held in file in the attorney's office. The stock ledger may also be held in the attorney's office, or may be transferred to any location in the world. The attorney provides the corporation's Resident Agent with the name and mailing address of the individual who holds and maintains the stock ledger.
Step Five. All instructions from the shareholders to the corporate officersand directors are communicated by the attorney. All communications between the shareholders and the attorney represent privileged information.
As you can see, if it is total financial privacy you are after, Nevada is the only state to consider for incorporating. If you know what the law allows you to do, and how to structure your affairs, it can be virtually impossible to uncover the ownership in a Nevada corporation.
As a defense against revealing corporate ownership in civil litigation, this can be a very effective strategy. Nevertheless, it may not be absolutely bullet-proof. When a civil case is in the discovery phase there is no guarantee that the court will not require the attorney to provide information over his objections. It is not as likely that this information would be allowed in the trial itself, but you may be defeated in your attempt to preserve absolute privacy.
On the other hand, I asked a partner in a prominent Southern California law firm that frequently utilizes the strategy outlined above concerning their experience in handling information requests for corporate ownership. "Some lawyers don't know what they are doing and simply comply with every request," I was told, "but we simply object on basis of privileged information and attorney/client work product, and we've never been forced to produce anything."
Information Sharing - the IRS
From the Reno Gazette-Journal, April 29, 1991:
Miller closes records to IRS
"Hands off: Governor says federal agency can't use state computers to find tax cheats.
"Gov. Bob Miller isn't going to let the IRS use state computers to track tax-delinquent Nevadans.
"Miller said Tuesday that he refused to open up employment, motor vehicle and other records to the IRS because there is too great a potential for abuse of peoples right to privacy.
"He gave examples of IRS undercover operations into Las Vegas bookmaking and a Reno-area crackdown on reporting casino dealers tip earnings.
"'The IRS, to date, hasn't treated us the same way its treated residents of other states,' Miller said.
"Millers announcement during a Las Vegas news conference came a week after the IRS proposal surfaced. Since then, Millers Carson office has received about 70 phone calls from irate people.
"'None of them was in favor of agreeing with the IRS,' said spokesman Mike Campbell.
"In Washington D.C., Sen. Harry Reid, D-Nev., was pleased. 'Gov. Millers decision was the right one,' Reid said, 'It puts the people of the state first, rather than the IRS.'
"Reid and Sen. Richard Bryan and Rep. James Bilbray, both D-Nev., still await word on a meeting they've requested this week with the IRS commissioner on IRS activities in Nevada.
"Miller's order directed Perry Comeaux, director of the state Department of Taxation, to notify the IRS office in southern Nevada that state records will not be shared.
"'I told them we weren't going to do anything to expand any cooperative effort with the Internal Revenue Service at this time,' Comeaux said.
Nevada has repeatedly denied the access of the Internal Revenue Service to these records, and is the only state that does not comply with IRS requests for information. As recently as July of 1991, Nevada's Governor ordered the directors of the state Department of Taxation and other agencies to seal state records from the Internal Revenue Service.
We live in the age of the electronic superhighway. Information about each of us is bought and sold every day by list brokers, advertising agencies, demographers, and statisticians. Computer links between government agencies make entire databases available for convenient cross-checking of vital data. This is an alarming trend. Those who value their privacy should know of the following aspects of Nevada corporations.
Every state in the United States, with the singular exception of Nevada, has an information sharing agreement with the Internal Revenue Service. California residents, for instance, who file either individual or corporate state income tax returns, will have their financial information checked against their federal return without their knowledge. States have agreed to this, for the most part, because the sharing agreements allow the states to have access to IRS records to verify state personal and business tax returns.
Information sharing goes far beyond tax returns. The Internal Revenue Service also has agreements to access any of the individual unemployment records, welfare and social services records, workman's compensation records, driver's registration or motor vehicle registration records of the other states.
Information Sharing - Service Bureaus
There are a large number of companies, such as Dunn & Bradstreet, which maintain computer links with the various governmental offices across the country in order to access and sell commercially information on companies contained in each state's database. All of the information that each Secretary of State collects is readily accessible through this channel, including the officers, directors, and stockholders, if the state records provide it - complete with mailing addresses.
Also available in some instances is detailed information on company revenues and net worth. The interest these companies have in this information is, of course, to provide targeted mailing lists to anyone who is willing to pay for it.
Nevada offers a computer link as well, but the only information it can provide is that which the Secretary of State already collects - and we have already discussed how limited that is. The names of stockholders are not available from the Secretary of State of Nevada, because the office does not collect that information. Neither do they collect financial information on Nevada corporations.
MANAGEMENT & CONTROL ISSUES
Nevada allows corporations a great deal of flexibility in organizing its ownership interests to fit the needs of that particular business. The Nevada corporation may issue different classes of capital stock, and assign different series within each class. The owners of any one of the classes or series of stock may be assigned different rights and privileges.
There may be several classes of common stock and several classes of preferred stock, each with specific rights described in the articles of incorporation. The preferred stock is differentiated from common stock by the fact that it has the first right to receive a distribution upon the liquidation of the corporation. When several classes of preferred stock are present, they may be ranked in order of preference.
If the articles of incorporation permit, the board of directors may divide a class of preferred stock, without the approval of the stockholders, into a series with it's own assigned rights. The effect of this is that the board of directors can tailor series of shares to be issued in a special circumstance without the costs and delays of conducting a special meeting of the stockholders to authorize a new class of stock. The more stockholders a corporation has, the more this convenience is appreciated.
Minimum Capital Requirement.
Nevada Corporation Code does not place any requirement that any minimum amount be invested in a corporation. If, however, the corporation loans out a disproportionate amount of its funds, the IRS may reclassify the loans as stock purchases by determining that the corporation is undercapitalized.
Shareholder Rights to Privacy.
Concerning the rights of a minority shareholder to inspect books and records, the Nevada Revised Statutes [78.257] provides that any shareholder who owns at least 15% of the issued stock of a corporation has a right to inspect all books and records, but must bear the costs of such an inspection. It goes on further to state:
"Any stockholder or other person, exercising (these rights) who uses or attempts to us information, documents, records or other data obtained form the corporation, for any purpose not related to the stockholder's interest, in the corporation as a stockholder, is guilty of a gross misdemeanor." (emphasis added)
The following points are made:
1. If a stockholder holding less than 15% of the issued stock is denied the right of inspection, then certainly third parties can be denied inspection of corporate records, unless the courts grant access to the records under subpoena.
2. Clearly the statutory intent of this access is for the interest of the shareholders, not for any third party. Anyone who obtains information from the corporation books and records for "any purpose not related to the stockholder's interest" commits a crime. That is rather good protection.
Approval required on sale of assets.
Nevada Corporation Code requires that the shareholders approve the sale of all of the assets of the corporation. Approval takes a majority of the vote of shareholders that have voting rights, unless the articles of incorporation require a larger portion of the outstanding shares. In the dissolution of the corporation, any proceeds not required to pay existing debt is distributed to shareholders, and their shares are then canceled.
THE NEVADA SECRETARY OF STATE'S OFFICE
This section will describe the process of incorporating in Nevada, as well as providing you with a general background on the variety of services and associated fees for the other services provided by the Corporation Division of the Secretary of State's office.
Name Availability & Reservation
The first step in forming a corporation is in selecting a name for the corporation. The name you choose should be an asset to the company, since most of your advertising and public relations will likely revolve around it. It should tell people what the company does, should be consistent with the image you want to convey, and should be easy to remember and pronounce.
You couldn't incorporate a restaurant as McDonnals Hamburgers, Inc., since that would be unfair to the original McDonalds. This restriction is intended to protect the rights to corporate names, protect the public from fraud and deception, and prevent unnecessary litigation.
The Secretary of State's office can tell you whether or not the name you have selected is available for use. Nevada's Corporation Code requires that the name of a corporation cannot be "deceptively similar" to the name of any other corporation or limited partnership authorized to conduct business in the state.
Under Nevada law, the similarity of the corporate names "Peoples Furniture Exchange, Inc." and "Peoples Furniture Company, Inc." is not enough for the Secretary of State to refuse to file the second corporation (Nevada Attorney General's Opinion A-52, 2-15-1940). The two corporations must be given names that distinguish them from any other company. If a name is determined to be too similar to that of another corporation, the Secretary of State will only agree to file that corporation if a written consent to the use of that name by the other company accompanies the articles of incorporation. The Secretary of State has complete discretion in deciding whether such a similarity exists, and his/her decision may only be reviewed in court.
Corporations cannot gain the right to exclusive use of geographical words in corporate names, unless the words themselves have acquired a meaning in the mind of the public associated with the business of the corporation. (Attorney General's Opinion 50, 4-26-1951) So, Nevaco Trading Corporation would be considered a valid name, even though Nevada Trading Corporation already exists, but Trading Corporation and Trading Corporation of Nevada are deceptively similar.
In order to show that the company is a corporation, a number of designations may be included in the name; e.g., Corporation, Corp., Incorporated, Inc., Limited, Ltd., etc. These designations are not required to be part of the name of the corporation unless without the designation the name would sound like the name of a natural person. For example, a corporation cannot be called simply "John Doe," but can be called "John Doe, Inc."
The use of the specified designations should be strongly encouraged. In fairness to others who may conduct business with the corporation, when a designation is used by the company, the public is aware of the limitation on the liability of the individuals who may represent the corporation.
There are also words that must have prior clearance from other state agencies before they can be used to name your corporation. Among these words are:
Accident, Appraisers, Assurance, Banco, Banking, Bonding, Casualty, College, Engineer, Engineering, Financial, Fire, Gaming, Guarantee, Guaranty, Health, Indemnity Insurance, Investment Investor, Liability, Life, Loan, Mutual, Protection, Purchasing Group, Realtor, Reassurance, Reinsurance, Risk, Risk Retention Group, Savings, Surety, Trust, Underwriter, University, Variable, Warranty,
If a corporation is to be a professional corporation, the name must include the last name of at least one of the stockholders, and must be followed by "Professional Corporation," "Prof. Corp.," "Chartered," "Limited," or "Ltd." For example, a physician's office might be incorporated as "Dr. John Doe, M.D., a Professional Corporation."
While it doesn't cost anything to check with the Secretary of State to see if a name is available for use, for a fee, they will reserve the rights to any specific corporate name that they determine to be available for your use and your use alone. This reservation is good for ninety days, and may be renewed if necessary. In Nevada, the number for checking name availability is (702) 687-5203.
If you're in business now, or are planning to go into business soon, you should either reserve the name you want to use to prevent another company form using your name on that state's records, or incorporate under that name now. If you plan to do business in a number of states, the chances are greater that one of the states will have a conflict with the name you would like to use. Only by checking and rechecking can you insure that your chosen name is available for use. Many states may allow you to register the name of your foreign corporations without qualifying it to do business in that state, so remember to ask if that service is available.
Once your name has been approved for use by the state, you still may need to make sure that the name you have selected is not registered as a federal trademark on the Principal Register in Washington, D.C. If a similarity exists and a dispute arises, you may have to prove that you have a prior right to the use of the name.
Status
The Nevada Secretary of State has a telephone number where anyone can call and check the status of a corporation. That number is 900-535-3355.
A corporation must be maintained by filing the annual list and officers and directors, and paying the annual fee. If the corporation does not follow this procedure and is between sixty and two-hundred seventy days late, it lapses into "delinquent status." A delinquent corporation may be brought current any time during this period by paying an additional fee. The Secretary of State will only notify the resident agent in writing of a delinquency or revocation of corporate charter, not the directors, officers, or shareholders.
If the corporation has not been brought current within nine months, the corporate charter will be revoked by the state. A corporation that has been revoked may be reinstated any time within five years, by paying all of the fees that would have applied during the period of revocation and an additional penalty.
The catch is, that once your corporation has been revoked, your corporate name is no longer reserved by the Secretary of State, and someone else can incorporate under your name. Also, any action taken during the period of revocation is outside the protection of the corporate veil.
Certificate of Good Standing
Upon request, the Secretary of State will issue a "Certificate of Good Standing" to any corporation that is current in its filings and fees with the state. This certificate costs , and validates that the corporation was in good standing as of the date the certificate is issued.
Anytime that you qualify a Nevada corporation to do business in another state, you are required to provide to that state a Certificate of Good Standing from the Secretary of State's office. Banks also will require a Certificate of Good Standing in many instances, especially when applying for corporate credit or loans.
Customer Service
The Nevada Secretary of State's office has been traditionally extremely responsive to the needs of Nevada corporations. The number of corporations filed with the State in recent years has forced some limits on their ability to respond to some requests. Frankly, in many respects the Secretary of State's office has become bureaucratic to a degree you might expect of a larger state.
Another significant change to Nevada's Corporation Code is the allowance for filing corporate documents via FAX machine or other technologies not yet developed. As of this writing, the Secretary of State's office is still trying to decide how to handle these technologies, since live signatures and notaries are still required to be on file. It is anticipated that policies may be developed in coming years that will allow for filing Nevada corporations by FAX or modem.
Even so, they continually make changes to improve. In the 1991 Nevada Legislature, the Secretary of State petitioned for several new changes that continue to put the office in the forefront of existing customer service technology.
The Secretary of State now allows for a 24-hour rush for any filing of corporate status. The 24-hour rush includes filing articles of incorporation, amendments or mergers, corporate searches, or reinstatements. If you need to use this service, be aware that the Secretary of State's office reserves the right to use all 24 hours of the window they provide.
Small Corporate Offering Registration (SCOR)
Nevada has recently adopted the Small Corporate Offering Registration Form, (SCOR Form U-7) which allows a business to reach capital through a public offering of up to $1 million every twelve months. The SCOR program was developed by the North American Securities Administrators Association (NASAA) in cooperation with the Securities and Exchange Commission and the American Bar Association, and contemplates an exemption from federal registration by virtue of Rule 504 of Regulation D of the federal securities code.
This type of registration has been made available in 34 states across the country. The program allows easier access to public capital at a lower cost. The principal innovation of this program is the creation of the simplified form with a question-and-answer format that permits an officer of a corporation to fill in the blanks, file it with a state securities administration, and, upon approval, use it as a disclosure document in a public offering. One of the notable features of this program is the requirement that shares be sold at a minimum of per share to avoid the common pitfalls of a penny stock offering. A SCOR offering is far less expensive than a regular initial private offering (IPO), and you don't need a high-paid underwriter.
A SCOR filing may be easier than a fully registered stock offering, but it is not necessarily a breeze to accomplish. It can still be a challenging process involving the preparation of necessary forms and documents, getting state approval for the offering, selling the stock, and dealing with the administrative tasks of having additional investors. As a rule of thumb, a SCOR offering should take at least three to six months to complete.
The U-7 application is designed in a question and answer format, and asks for information on the company's history, directors and officers, risk factors, assets, capitalization, use of proceeds and plans for distribution. There are about 250 questions in all. In addition, the application requires that the articles of incorporation, bylaws, and audited financial statement be submitted. Even then, expect to resubmit the application several times until it's format is approved.
Several methods can be used to sell the shares, including direct mail, telemarketing, commercial advertisement, networking, and sales presentations. As an alternative, the corporation could engage an underwriter or bank, which usually charge a 10 to 15 percent fee.
NBFR ORDER FORM
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