Asset protection and its sequence begin very early in the game. If properly planed, the asset protection exercise will begin in advance of the asset acquisition sequence to best shield liabilities and claims. When it comes to asset protection and liability avoidance, it is best to remain as legal as possible while remaining clandestine and invisible to threat.
Each state of the Union has different incorporation laws and affords different levels of protection to the corporate body. Florida corporations provide a certain benefit; Delaware corporations offer others and Nevada corporations offer still, more.
Of the many states that seem advantageous to incorporate, one of the more interesting and the one deserving the attention of most asset acquirers is Nevada. This is so because; Nevada offers a unique value proposition for companies not domiciled in the state. Meaning, companies are allowed to physically operate and administer a business anywhere in the world but maintain a corporate address within the state. Three main issues differentiate Nevada.
A corporate veil is a legal concept that protects the shareholders from issues and infractions generated at the corporate level. It protects the shareholders from liability. However, in many states, it has become increasingly popular to pierce the corporate veil by citing an ever increasing set of precedents. In Nevada piercing the corporate veil is rare and thus advantageous to the shareholder.
Choice of Forum
This is an even more interesting law that allows the owners of a Nevada corporation to determine where a suit maybe filed. For example, if a customer or vendor wishes to file a suit, it is in the owner’s prerogative to decide the location. If the owner decides to take it to New York at great expense to the plaintiff, there is a chance that the plaintiff may find it cost-prohibitive.
Choice Of Jurisdiction
Similar to having a choice of forum, it is also possible to have a choice of jurisdiction, where it is determined what law can apply to a dispute. This means the company is free to choose the state where it is most beneficial for the company rather than in neutral ground or one that favors the plaintiff.
These three factors make the decision to incorporate in Nevada one of the most popular among those wishing to shield asset holding companies as well as operating companies from prying eyes and thieving hands. It is a way to be a little bold with one’s actions yet comfortable in the knowledge that the entity is securely protected.
However, do keep in mind that illegal activities have no ground in law to deserve protection. While the burden of proof to pierce the corporate veil is high, the mere possibility of illegal or treasonous activity will shatter the veil and expose the shareholders.
Laurence Berke is an accountant who likes to write about financial topics like Nevada corporations and guides people on how to incorporate in Nevada