What is a 'Nevada Corporation'

A Nevada corporation is a business incorporated in the state of Nevada, which is known to be business-friendly through its tax and corporate law statutes. Companies that incorporate in Nevada have several distinct advantages, including no state income tax, no franchise taxes, no personal income taxes and no succession taxes. 

Another unique advantage of Nevada corporations is that company officers and directors are well-protected against lawsuits arising from lawful business pursuits.

BREAKING DOWN 'Nevada Corporation'

Nevada corporations exist because of differing state laws about taxes and liability, and because corporations are typically governed by state law. Nevada’s laws make it a well-known corporate haven. Delaware has similar laws on the books, and a Delaware corporation functions similarly to a Nevada corporation.

Nevada has become a widely used tax haven in recent years, drawing a large number of West Coast-based companies in the U.S. A company may have a headquarters in another state and still be incorporated in Nevada. Some individuals also choose to form a Nevada corporation to protect their individual assets. Not only does Nevada not have an individual or corporate state tax, it also is one of two states, along with Texas, that does not have an information sharing agreement with the IRS.

In addition to public companies that choose to incorporate there, many private companies are attracted to the state because of its strong protection laws against hostile takeovers of a business. 

A term known as "piercing the corporate veil" refers to the ability of a plaintiff to go after the personal assets of a company owner or director. While piercing the veil is rare in any state, Nevada is well-known for its strict adherence to the protection of personal assets and information.

Advantages and Disadvantages of a Nevada Corporation

Nevada encourages businesses to incorporate in the state by offering a number of incentives. Along with the tax and legal benefits noted above, Nevada is lenient about the requirements it places on those corporations and their board members. For example, the stockholders, directors and officers of a Nevada corporation are not required to be U.S. citizens. Nevada also has strong privacy laws that favor businesses. The names of the officers and stockholders of a Nevada company are not public record. The board of directors of a Nevada corporation does not have to hold meetings in Nevada. The state has minimal requirements in terms of annual reporting and disclosure documentation.

Nevada corporations that do business outside the state are still subject to taxes in the other states where they operate. Companies that do most of their business in California, for example, will have to register with that state and file tax returns there as well. If they fail to do so, they may be subject to hefty fines.

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