1. Nt t 2. Master Resell/Giveaway Rights You do have the right to sell this report, offer itas a bonus in your packages, (digital or physical) give it away for free to yourclients, on your blog, with material you send out, etc. You also have the rightsto pass these rights along to anyone who received this report. You do not havethe right to change the content in any way or quote it without giving credit tothe author.Dedicated to Your Success!Scott LetourneauCEO 2009, Nevada Corporate Planners, Inc., ALL RIGHTS RESERVED. This report/book contains material protected under International and Federal Copyright Laws and Treaties. Master Resell Rights as details above. 3. TABLE OF STRATEGIES Be Sure to read your SPECIAL ONE TIME OFFER on page two only available to those that review our Insiders Guide!SCOTT J. LETOURNEAUCHAIRMAN AND CHIEF EXECUTIVE OFFICERNEVADA CORPORATE PLANNERS ...............................................................................1DISCOVER HOW YOUR COMPANY CAN SURVIVE THE ODDS AND RANK IN THE RARE 5%THAT ARE STILL IN BUSINESS AFTER FIVE YEARS!.......................................................3DID YOU START YOUR BUSINESS WITH A DREAM OR A VISION?NCP HELPS YOU MAKE IT A REALITY FASTERTHAN ANYONE ELSE! 4HAVE YOU MASTERED THE FASTEST WAY TO GROWYOUR COMPANY? .................................................................................................5COULD YOU USE A BUSINESS LINE OF CREDIT.............................................................6 (NOT TRADE CREDIT) OF UP TO $100,000?................................................................6ESTABLISHING THE PROPER FOUNDATION FOR YOUR BUSINESS ......................................8IS YOUR KEY TO SUCCESS!.....................................................................................8WHY INCORPORATE?..............................................................................................9SOLE PROPRIETORS ARE ROLLING THE DICE...............................................................9INSURANCE IS NOT A FOOL-PROOF SAFETY NET .......................................................14DONT EXPECT SYMPATHY FROM THE COURTS, EITHER................................................14BE SURE TO PLAY BY THE RULES..........................................................................15ADDITIONAL BENEFITS OF INCORPORATING..................................................................17DO I NEED AN ATTORNEY TO INCORPORATE?...........................................................19WHICH STATE IS BEST TO INCORPORATE YOUR BUSINESS?...........................................20TAKING A CLOSER LOOK AT EACH OPTION ............................................................21WHY NEVADA? 21 Understand the "Circle Of Liability" And Youll Understand the Real Benefit of Incorporating In Nevada! ................................................................................................................21THE BEST INVESTMENT YOU CAN MAKE...................................................................2416 REASONS TO INCORPORATE IN NEVADA................................................................26WHATS MY BEST CHOICE: NEVADA OR DELAWARE?..................................................32CHOICE OF ENTITY COMPARISON.............................................................................38 Taxation............................................................................................................................................38 Fringe Benefits..................................................................................................................................38 Tax Form Filed.................................................................................................................................38 Tax Year End.....................................................................................................................................38 Foreign Owners................................................................................................................................38 4. Charging Order................................................................................................................................38 Taxed at State Level..........................................................................................................................38 Save SE taxes....................................................................................................................................38 Double Taxation................................................................................................................................38 PSC Problems...................................................................................................................................38 Management......................................................................................................................................39WHAT FACTORS AFFECT YOUR ENTITY CHOICE? ........................................................40WHAT DOES NCP HAVE TO OFFER THAT OTHER ENTITY-FORMING SERVICES DO NOT?...40HERE ARE A FEW CRITERIA TO LOOK FOR WHEN SELECTINGA COMPANY TO HELP YOU START YOUR BUSINESS: 44SEVEN CRITERIA THE COMPANY YOU CHOOSE MUST MEET .........................................45BEFORE YOU LET THEM FORM YOURNEXT CORPORATION OR LLC!................................................................................45A SUMMARY OF THE KEY TAX LAW CHANGES FOR 2009!............................................47STANDARD MILEAGE RATE.....................................................................................49WHAT MUST YOU CONSIDER WHEN SELECTING THEBEST ENTITY FOR YOUR BUSINESS?........................................................................52LLC PARTNERSHIP ILLUSTRATION............................................................................52FOUR VITAL AREAS..............................................................................................61TO SUPPORT YOU AND HELP YOUR BUSINESS GROW:................................................61WHATS THE MOST COMMON REASON FORBUSINESS FAILURE? ............................................................................................65STEP 1: FAST START TO INCORPORATE YOUR BUSINESS! ...........................................73STEP 2: FAST START SUPPORT TOOLS TO HELP YOUR BUSINESS GET OFF TO A FASTSTART TO PROFITS AND STAY AHEAD OF YOUR COMPETITION!......................................77STEP 3: FAST START BUSINESS FOUNDATIONAL SERVICES TO INVEST IN AND HELP YOURBUSINESS GET OFF TO A FAST START TO PROFITS! ..................................................80STEP 4: FAST START PROFESSIONAL REFERRALS-TAXES AND LEGAL, MERCHANT ACCOUNT,PAYROLL, CASH ADVANCE, CREDIT REPAIR AND RETIREMENT PLANNING! .....................86STEP 5: FAST START PROFITS FOR YOUR BUSINESS-MAKE NCP ANOTHER PROFIT CENTERFOR YOUR BUSINESS!...........................................................................................86STEP 6: FAST START TO JOINT VENTURES!........................................................................................................................87STEP 8: VISIT OUR FAST START BLOGS AND LEAVE YOUR COMMENTS: .........................90STEP 10: UPCOMING FAST START EVENTS FOR YOUR BUSINESS!.................................91WANT TO ADD ANOTHER $500 TO YOUR BANK ACCOUNT EACH MONTH? $1,500?$2,500? WITHOUT BREAKING A SWEAT?................................................................94WHAT DO OTHERS SAY ABOUT DOING BUSINESS WITH NCP?.....................................95READY TO GET YOUR BUSINESS OFF TO A FAST START?...........................................100BECOME AN AFFILIATE PARTNER WITH NCP:...........................................................101 5. "Hi. Im Scott Letourneau and I started NCP to help business owners navigate the confusing maze of corporate formation decisions. At NCP, our mission is to help your company get off to a fast start, then keep it squarely focused on success. We want to ensure that your business is one of the 5% still thriving after five years (vs those that fail.) We help entrepreneurs achieve their dreams! Scott J. Letourneau Call us. We can help." Incorporating and Business Credit Expert Scott J. Letourneau Chairman and Chief Executive Officer Nevada Corporate PlannersOver 12 years ago, Scott Letourneau founded Nevada Corporate Planners, Inc. and FastBusiness Credit, Inc. in 2003. He is also a busy lecturer, consultant and author.Mr. Letourneau is recognized and recommended by top professionals, such as Sandy Botkin,Attorney/CPA, and Attorney Dr. Arnold Goldstein, as the foremost expert on not only Nevadacorporations and entity structuring, but also creating and structuring entities nationwide.To his 5,000+ clients, Mr. Letourneaus expertise has allowed them to incorporate withconfidence and "get their business off to a fast start".Mr. Letourneau has a BA in Finance, a Master Practitioners Degree in NLP and is the authorof "The Top Costly Mistakes to Avoid When Incorporating".He has appeared on CNN Headlines News with Pat Summeralls Success Stories and hasalso been interviewed by Channel 8 News, in Las Vegas, and various radio stationsthroughout North America for his expertise and experience.He was a contributing author in the book released in 2008 by Entrepreneur Magazine, StartYour Own Information Marketing Business!!Scott is a rare combination of the best training from Tony Robbins, Dan Kennedy, MichaelGerber and Jay Abraham all wrapped into one speaker (coach).Mr. Letourneau is happily married to De Ann, an amazing classical violinist, and a proudfather of three beautiful girls, Gracie, Rosie and Faith! 1www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 6. A One-Time Only Special Thank You Offer Available to those that Review our The Insiders Guide to Incorporating Your Business and Protecting Your Assets To Gain Access to This Special Offer You Must Call NCP at 1-877-515-0505 with 72 Hours of Requesting this Guide! Here is what you will receive when you call Free Bonus Gift #1: A free 30 minute consultation with one of our senior business analysts who are the best trained in our industry. You will have the opportunity to speak to the best, avoid costly mistakes and gain insights from years of experience to help your business start off on the correct foundation and get off to a fast start! $200 value! Free Bonus Gift #2: Top 20 Costly Mistakes Made Before and After Incorporating You will have an opportunity to test your business and asset protection I.Q. with our 20 question test. You will discover the most costly mistakes and how to avoid them before and after you form your corporation or LLC. Nowhere else will you find these powerful insights in one report!..........$47 value! You will have the opportunity to purchase our top selling, Nevada Incorporating Secrets 2 CD set, loaded with the insider facts to incorporating in Nevada at a 50% discount! In this cd you will Discover Huge Benefits of having your entity in Nevada! This CD will clear up a lot of confusion for you if youve ever considered incorporating in Nevada . Plus, learn the key questions you need to ask to help determine what entity is best and other valuable strategy insights! You will only pay $97 $48 for this powerful 2 CD set! This is a one-time offer on the day you call (must be within 72 hours of requesting this guide). 2www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 7. Discover How Your Company Can Survive The Odds And Rank In The Rare 5% That Are Still In Business After Five Years! From NCP CEO, Scott Letourneau Dear Entrepreneur, In my ongoing efforts to deliver actionable value to you, I have invested more incomprehensive research and streamlined systems to help your business get off to a fast startthan anyone else because I want you to be one of the TOP 5% that are still in businessand thriving after five years! If your goal is to protect your assets or determine the best entity or structure for yournew partnership, business, real estate opportunity youve come to the right place. Not onlydoes NCP track cutting-edge research to give you the best information on which entity isoptimal for your needs, but we have also created one of the most comprehensive networks ofprofessional resources in the U.S. to keep you moving in the right direction. That correctly-focused forward momentum is crucial in our challenging business worldtoday. As if cutthroat competition, a fluctuating marketplace, and the double-edged sword ofthe new global economy werent enough, forces threaten from outside your business aswell According to the FBI, More than 250,000 Criminals Make their LIVING Each Year Through LAWSUITS! Will Your Assets Be Protected? And not only do you have to survive lawsuits, but the scrutiny of the IRS, too.Amazingly enough, in a self-audit last year the IRS determined they were $300 BILLIONSHORT in tax collections --- and that their biggest culprit was NOT large corporations.Theyve decided that small business owners just like you cause most of their shortages,especially sole proprietorships. That makes sole proprietorships that file a Schedule C taxreturn 300% more likely to get hit with an IRS audit versus those who do not! The IRS Has A $300 Billion Per Year Tax Gap. Is Your Business A Target? Do You Have A Strategic Plan To Avoid Destructive Audits? As you read our guide, youll discover why sole proprietorships are such huge IRStargets. That alone should scare off most business owners, yet over 67% of all U.S.businesses still operate as sole proprietorships. It makes terrible business sense but then, 3www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 8. these well-intentioned (yet naive) sole proprietors stubbornly cripple themselves even moreby dramatically REDUCING their opportunity to utilize business credit. Did You Start Your Business With A Dream Or A Vision? NCP Helps You Make It A Reality Faster Than Anyone Else! Let me ask you an important question: What is your dream, your vision? Are youone of the 500,000 every month looking to start a business? Perhaps you will become anAwakened Entrepreneur, as Michael Gerber describes in his recent book, Awakening theEntrepreneur Within. (Be sure to listen to my timeless interview with Michael Gerber, avaluable bonus that youll receive as a new NCP client that will inspire you to take your dreamto a new level.) Perhaps, your dream for your new business is to provide quality services to yourclients and make a difference in your marketplace. Youre no doubt excited, yet maybefeeling a bit overwhelmed. You may have the ability to start a successful business, yet maynot have a handle on the key strategies to get you there quickly. If anything rings true here, I know how you feel. I was there twelve years ago when Istarted NCP. I was on a mission to provide top-quality service for those who wanted toincorporate in Nevada. I considered it my duty to dispel the misinformation that was soprevalent back then (and still is) about this valuable, yet misunderstood strategy. Believe me; I know what its like to be an entrepreneur. Over the last eleven years, Ihave invested an enormous amount of money with many top professionals to ensureconscientious, accurate service for our clients, including fees paid to Deloite and Touche,multiple law firms and other professionals. I have personally worked many 70-90 hours,seven days a week. I have made (and learned from) every mistake in the book along theway, especially in the HR and employee area. 4www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 9. Have you Mastered the Fastest Way to Grow Your Company? Then I began studying with the worlds top business experts, including JayAbraham, Chet Holmes, Dan Kennedy, Michael Gerber and Tony Robbins. I hired mentors inHR and leadership to help take NCP to a whole new level. Weve done so much more thansurvive the odds for the past twelve years --- we have prospered. We now have moreopportunity and JVs on the table than ever before to help more entrepreneurs succeed! with Marketing Legend, Top Fortune 500 Sales Trainer, Jay Abraham Chet Holmes Top Internet Guru, Marketing Superstar, Armand Morin Dan Kennedy E-Myth Legend, Business Marketing Chicken Soup for the Soul, Michael Gerber Expert, Joe Polish Co-Author Mark Victor Hansen George Ross, Gene Simmons of KISS Outrageous AdvertisingDonald Trumps attorney Guru, Bill Glazerand business negotiator 5www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 10. After implementing many of the strategies that I learned from these experts, NCP hasbecome one of the most successful and well-respected companies in our field. I consider all those years of mistakes and successes a distillation process, helping meto tailor our services and to transform NCP into what I call a Launch Pad for BusinessSuccess. Our goal is to help YOUR company be everything it can be, too --- and more! I share my story with you to encourage you and reassure you that you are not alone. Ihave walked in your shoes. I know what youre facing. The effort may be massive, but yourresults can be, too --- with the proper support. Today, I actively mastermind and personally network with most of the top marketingand Internet professionals in the world. I work closely with hundreds of other top growthexperts, regularly attend many of the top seminars worldwide, and invest thousands eachyear to stay on the cutting edge of strategy and information. Ill gladly do whatever I can to gain your trust as our client. I know whats being offeredout there, and can confidently say that no company comes close to our overall passion andcommitment. Weve assembled the most comprehensive wealth of cutting edge resourcesand strategies, any one of which can help steer you on the path to success faster, with lessrisk, and as efficiently as possible. Heres just one Could You Use a Business Line of Credit (not trade credit) of up to $100,000? In our most recent breakthrough, NCP has UNLOCKED the BANKS CODE toobtaining Lines of Credit (REAL CASH) for your business! As an NCP client youll learnthese valuable secrets, get capital when you need it, and avoid the number one reason for allnew business failure: lack of cash flow. We dont want to see you become just anotherstatistic --- one of the 80-99% that fail in the first five years! In fact, that cash infusion canprovide the marketing dollars to propel your business to the next level. Ive shared just a few of the many ideas I have to help your company not only getstarted, but to prosper. Read on for even more valuable information, tips and strategies.Should you have any questions, comments or concerns, please give our office a call at1-877-515-0505. Mention that you have downloaded our FREE GUIDE and ask for ourspecial bonus, yours just for calling!! Have a prosperous day! Scott Letourneau 6www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 11. CEO, Nevada Corporate Planners 7www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 12. Establishing The Proper Foundation For Your Business Is Your Key To Success! Anyone who operates a business, alone or with others, may incorporate. Under the right circumstances, the owner of any size business can benefit! But maybe youre wondering, How can I be sure Im choosing theright entity? Wait - what happens if I choose the wrong one? Will the IRS come after me? Will I really be protected against lawsuits? I have so many questions Everyone in business is looking for iron-clad protection, striving to bullet proof theircompany against todays ultra-competitive business climate. If youre like most, youveprobably asked yourself the questions above... or maybe you havent yet decided whetherincorporation is right for you. Maybe youre still wondering Why incorporate at all? And why in Nevada, versus in my home state? What are Nevadas benefits? Why starting your business as a sole proprietorship may prevent your business from having access credit for your business after you incorporate! Hint: You revolving debt ratio is a major factor and this is something you will never hear from your CPA! S-CorporationC-CorporationLLC Whats the difference? Do I have choices as to how my LLC will be taxed? How do I know which is best for me? Why is it so important to separate my personal and business credit? What is the different between trade and lines of credit? What does NCP do to help me be one of the rare 5% of business owners who make it past the first five years? Will they actually help my business make more profits? Lets be honest, I intend to compare you to others but what should I look for? Why use a company like Nevada Corporate Planners to incorporate my business? The following pages will answer these and many more questions, giving you a solidstarting point for one of the most important decisions youll ever make to ensure thesecurity, resilience, and prosperity of your business. We at NCP know that if you understand the importance of incorporation and have afirm grasp on all of your options, youll undoubtedly see the value of the services we offer. 8www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 13. The information here is only a small part of the contribution that NCP will make to yourbusiness, both in the incorporation phase and beyond. But lets get right down to business Why Incorporate? First, lets look at the basic question at hand: Why bother with incorporation at all? If youre like many small business owners, right now youre operating as a soleproprietorship. Thats probably not because youve chosen to, but because you dontconsider your business large or sophisticated enough to need to incorporate or maybeyouve never thought about it at all. If youre lucky, youll never have to pay the price for putting off that crucial next stepbut thats a very dangerous if. Sole Proprietors Are Rolling the Dice In todays ultra-competitive and dangerously litigious business climate, you cant affordto throw the dice with your most valuable asset. Your exposure is far greater than you maythink, both personally and professionally. As a sole proprietor, regardless of the size of yourbusiness, you personally have unlimited liability if your company is sued. You couldactually lose all of your personal assets. Sharon McNair is a CPA and a member of the Nevada State Board of Accountancy.She tells us that her fellow CPAs often advise their clients that they dont have to incorporateuntil they reach a certain profit level say, $30,000. She thinks this is madness and wecouldnt agree more. Think about it just being involved in a lawsuit is so very, very costly,regardless of whether you win or lose the case. Its pretty twisted logic to think that a smallbusiness can absorb that financial blow better than a larger one. Worse, most people are naively unaware of what can happen to them, bothprofessionally and personally, if their business is hit with even a frivolous lawsuit. Here arejust a few things you would struggle with, or be completely unable to do if yourbusiness is sued: 1. You may not be able to get a loan for a new home, refinance or take a second mortgage on your current home. (Well explain why in a moment.) At best, youd have to pay a much higher interest rate, because youre now considered a higher risk to the lending institution through no fault of your own. 2. You may not be able to finance a new car. 3. You may not be able to lease office space. 9www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 14. Why do lawsuits cause such a problem with loans? If you havent recently applied for ahome loan, a second, or financing for a car, you may not be aware of how times havechanged. Five years ago financial forms asked, Do you have any judgments against you?That meant, Have you been sued, lost the suit, and had a judgment levied against you? However, financial institutions have gotten smarter. Theyve tightened up the systemthat they use to rate levels of risk for loan applicants. Todays loan applications ask a verydifferent question: Are you currently involved in a lawsuit? That means that if anyonetries to sue you for any reason, frivolous or not, at the very least youll be rated as a muchhigher risk. (Remember, thats before the suit is even decided.) And that translates to a lotof money out of your pocket! End result: You may be financially paralyzed! Are you willing to forego that dream home, that new car, because someone tripped ona pavement crack in your business parking lot? And just imagine what being unable to leaseoffice space could do to your business Creating a legal entity separates the business from you personally, so that any legalaction can only affect that entity and not you personally! This is by far the biggest reason to incorporate or form an LLC. It makes no sense tohave a sole proprietorship unless you have no assets or future assets coming in whichcase you shouldnt and wouldnt be in business at all. Sole Proprietors Are Risking Their Personal Credit And Capability For Future Financing! You may already be thinking, I dont plan to have a sole proprietorship Imconvinced that I need to form an entity. But when will you take action? If you wait 30 days orlonger, do you realize the negative impact that may have on your business? Although its notimpossible for a lawsuit to pop up in that short period, a MUCH bigger (and disturbinglycommon) mistake lurks at this important business start-up phase Using your personal credit cards to finance the start-up of your business is the mostwidespread mistake made. Added to the folly of operating as a sole proprietorship with alets see how we do first before we incorporate mentality, its a recipe for disaster. Hereswhy: Financing your business with your personal credit (credit cards, home equity line ofcredit, etc.) negatively affects your revolving debt ratio. That ratio is a major factor in yournew corporation or LLCs ability to obtain a business credit card at the start,,, and later, abusiness line of credit. 10www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 15. Why is this so important? The number one reason business owners fail, especiallyduring the first six months, is lack of cash flow. Thats when the folly of overestimatingrevenue and underestimating expenses rears its ugly head. And for most small businessowners, that behavior is as predictable as the sun. NCP is one of the few, if not the only company that literally Cracked the Banks Codeon business lines of credit for you. We spent more than four months going back and forthwith a major bank to figure out exactly how they make their decisions as to who gets thosevaluable lines of credit, how much and who does not. Factors such as the liquid credit score, the risk category of your business, grossrevenues, your personal credit score, derogatories, and your revolving debt are all taken intoconsideration. Heres the bottom line: If youre starting your business by nearly or completely maxingout your credit cards, the bank will ignore you. Even with a 700 personal credit score, if yourrevolving debt is close to 90% maxed out, that sends the bank a very clear message that youcannot manage your personal debt. Why give you money to start a business? Basically,youre on your own financially. Dont be misled by TV or Internet ads about corporate credit, either. Usually, theyrefer to trade lines of credit, which doesnt give you actual cash for you to use in yourbusiness as you choose. Now, if youre building homes or have more than 30 employees,developing trade credit can be important --- but its still not cash. You cant use trade credit tomake payroll, nor to spend on pay-for-click advertising or any of the many other strategiesyou need to start quickly and gain that all-important competitive edge. Want a simple solution? 1. STOP using YOUR PERSONAL CREDIT CARDS ASAP! 2. Incorporate or form an LLC 3. Open a BUSINESS CREDIT CARD and use that ONLY for your business expenses. Yes, it is personally guaranteed, but it will NOT negatively impact your personal revolving debt ratio. Thats key advice as your business gets started. Remember, when your corporationor LLC applies for a business line of credit, half of the banks formula in determining eligibilityis your personal credit score --- and most importantly, the revolving debt ratio. 11www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 16. Sole Proprietorships Are 300% More Likely To BeAudited By The IRS Even By Las Vegas Standards, Those Are Incredible Odds! Fact: Sole proprietorships are currently being targeted by the IRS. Why? In aself-audit last year, the IRS discovered a $300 billion tax gap --- meaning that more than$300 billion-worth of taxes go unpaid annually. They concluded that the biggest offenderswere not large corporations, but rather small business owners who owed somewhere around70% of that $300 billion. Of that group, 1/3 were sole proprietorships. You can bet the IRSisnt going to ignore that low-hanging fruit! In fact, you are 300% more likely to be audited ifyou file a Schedule C. Is Your Business a Hobby, or a Business? Most people enjoy a hobby --- golf, tennis, cooking --- and while theyll spend moneyon those activities, theyre not a business. Yet when most people join a business opportunityor start a business, though they dont consider it a hobby, thats often actually what theycreate because they dont know the rules of the game. But they have a problem: The IRS is getting much tougher on this subject. Thenumber one reason the IRS goes after business owners is the failure to use proper analyticalrecords. Youd be well advised to use software like QuickBooks to determine how yourbusiness is really operating --- to update your gross revenue, cost of goods sold, and income. The biggest mistake we see new business owners make is using their online bankbalance as their only business financial barometer. First, thats the wrong way to makefinancial decisions. Second, it sends the IRS a very clear message: you are NOT seriousabout your business. This single mistake may cause the IRS to consider your business as ahobby. If they do, you cannot write off your hobbys losses against your earned income ---and that kills one of the biggest reasons to start a business in the first place. 12www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 17. 67% Of All U.S. Businesses Operate As Sole Proprietorships If Your Clients Are Business Owners, How Do You Protect Yourself? If everything weve told you is true (and it is), how do you keep your own businesssafe? To understand the mindset, consider these three simple, yet costly myths: Myth #1: Sole proprietorships are simple --- the easiest business structure to operate. As you know by now, the worst choice is to operate as a sole proprietorship. Unfortunately, simplicity and asset protection are inversely related, meaning the more protection you have, the more complex your situation may become. I know that does not resonate with many of you. But your goal is to accumulate profit and assets, and the more assets you accumulate, the more you must protect them. The good news is that you need not go it alone. The key is to strategize with a knowledgeable, experienced advisor to come up with your optimal protection plan. After all, you need to stay focused on adding value and profit to your new venture, not to become an expert on business start-up methods. You should only have to do that once --- but do it right. Myth #2: Most start-up business owners cover only one component of the big picture by getting tax advice from their professionals. But theres more. Could you benefit by having a separate legal entity to help save on taxes? Which entity is best for your venture? As you know now, there are many elements to consider. Myth #3: Im a good person, and I have insurance. Why would anyone sue me? Thats admirable, but thats not how the game is played. Desperate people dont care if youre a good person. If you have money --- or the perception of money --- youre a potential target! Dont bury your head in the sand. Now that youre aware of the pitfalls, take action yourself --- and arm your clients as well --- with the tools and information to be successful. After all, its in YOUR best interest to make sure your clients prosper! How do you make that happen? Call NCP and ask for more information on how we can help your clients and your business! We touched briefly on the question of insurance just now. Lets go a little deeper 13www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 18. Insurance Is Not A Fool-Proof Safety Net Even though many professionals tell you that youre protected by insurance, you canstill spend a lot of money defending a lawsuit without ever having a claim against yourinsurance policy. But what if a claim is made? Insurance may provide some level of protection butworst case, that protection may be only as good as the legal representation you can afford. (Icant tell you how many clients have found that their insurance companies werent nearly asfriendly when they filed a claim as they were when they first signed up!) True, you can get Errors and Omissions insurance (or E&O), business liability, andeven officers and directors insurance --- and again, a good policy should provide someprotection. But NONE of those will help you protect the corporate veil (a hugely importantbenefit that well talk about more later.) In fact, there is NO insurance policy in existence thatcan do that. If you have a smaller insurance claim of, say, $10,000, your insurance company willusually pay it. However, if you have a claim for $900,000 put the coffee on, because youcan expect a visit from your insurance companys attorneys. Why? To find a loophole inyour policy so they dont have to cover you. And of course, even if they do cover you, yourrates will skyrocket if your policy isnt cancelled! Dont Expect Sympathy from the Courts, Either Are you a landlord now, or do you have plans to own real estate in the future? Ifyoure ever sued, remember that juries are made up mostly of tenants... jealous tenants whodont own a house and yet you have several. This is their chance to get even with everylandlord who ever hit them with a late rent charge or made them get rid of that pet. Its pay-back time! Is it fair? No but its human nature. And consider this: Most judges earn less than you do. How sympathetic could theypossibly be? You might as well just hand over your checkbook and the title to one of yourhouses unless you know NCPs asset protection strategies. The bottom line? Win or lose, even with insurance, you could become financiallyparalyzed by being a sole proprietor. Does it make sense to leave yourself exposed? Of course not, especially when thesolution is not complicated, sophisticated, or reserved for the AT&Ts of the world. Thesolution is to incorporate! Creating a legal entity separates you from your business so thatany legal action will not affect you personally. 14www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 19. Heres an added benefit of incorporation: As any good marketer will tell you,perception is everything in the marketplace. That LLC or Inc. after your name helpspeople perceive you as larger than you actually may be. Plus, it adds to your credibility aswell it should. It shows that youre aware of the pitfalls lurking out there, youve done yourhomework, and youve taken the appropriate steps to protect yourself and your company.Youll be around next year, and the year after that. And that message to the marketplacetranslates to a very direct effect on your bottom line. Be Sure To Play By the Rules Its essential to do things properly when you incorporate. Remember, when yourcompany incorporated, you created a separate legal entity from you personally. Itsimperative that your corporation is treated as such. If the corporation is sued and there arentenough assets or insurance, the plaintiff may decide to go through the corporation and afteryou personally. This is called piercing the corporate veil, and the consequences to youcan be devastating. (More on that later.) You are essentially a sole proprietorship again,financially paralyzed, with a lawsuit against you personally! How do you keep this from happening? Your new corporate entity MUST: A. Follow corporate formalities, keeping recorded minutes and resolutions; B. Have proper capitalization, which is the amount of money you put into the corporation to get it started; C. MUST NOT commingle funds with your personal account. Under no circumstances can you use corporate money to pay for your personal expenses. Lets take a closer look at how these three requirements can be breached orcompromised: 1. Lack of corporate formalities. Heres an example: When an officer of the corporation goes on a business trip, the corporation must have a meeting to authorize that trip. This is hard for some to understand, especially if youre a one-person corporation and you wear all the hats. Still, you must show in your corporate meeting minutes that the trip was approved, because the corporation is NOT YOU. It must be treated as a separate legal entity. Some people will tell you that an LLC doesnt have to perform the same formalities as an S- or C-Corporation. (Actually, the main reason that CPAs sometimes recommend an LLC is because of lack of formalities.) While this is somewhat true, it is changing. 15www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 20. Weve discovered recent court cases involving piercing the LLC veil where the judge looked at corporate cases for guidance, particularly with regard to formalities. Accordingly, use of the term piercing the corporate veil has evolved to piercing the entity veil or piercing the LLC veil. NCP maintains corporate formalities for LLCs as well as for corporations. Our LLC record books have more than 50 pages of resolutions to protect our LLC clients. (Were one of the few companies in the U.S. to do so for our LLC clients.) 2. Lack of proper capitalization: When you form a corporation, it has to be capitalized. That usually means money is put into a corporate checking account, and stock for the corporation is issued to whoever capitalized it (usually an individual, but it could be another entity.) There are certain guidelines in each state that ask, Did you capitalize the corporation with enough money/assets, or was it too thinly capitalized? But what exactly is too thinly capitalized? Lately an unfortunate trend has been appearing in the courts. Theyve adopted a sort of 20/20 hindsight in some situations, and companies in high-liability sectors like manufacturing are especially at risk. For example, lets say youre a widget maker with five employees and youre capitalized at $50,000 and have a $1 million insurance policy - which is appropriate, because widgets are cheap and you dont sell many. Then one day, Joe Employee cuts off a hand with the box cutter and saddles you with a $3 million lawsuit. The court says, Mr. Business Owner, when you formed this company you should have known that Joe would slice off a hand someday, and you should have known that your insurance would cover only $1 million of the $3 million hed want. Since you only have $50,000 in capitalization, were going to consider your company too thinly capitalized. Therefore, were going allow for piercing your corporate veil to recover the rest. Crazy? Of course. But true. You can capitalize a corporation or LLC with cash, assets, and, in most states, services. However, services can create a tax problem. For example, say your partner owns 50% of the corporation and capitalizes it with $25,000. You own the other half, and you capitalize it with services (called sweat equity.) The IRS says you received an asset without paying anything for it; therefore they treat that $25,000-worth of services as personal income to you. That means you have to claim $25,000 in personal income but you never earned the money. What you did get was stock in a company, and now you have to pay taxes on it! One solution might be for your partner to loan $24,000 and then have both partners capitalize the entity with $1,000 each. 16www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 21. Just remember, the corporation has to pay back the $24,000 as a loan, whereas in the first case it was a capital investment which does not have to be paid back. This is a potential problem with partners when it is not clear whether the money is capitalization or a loan. 3. Commingling of funds. As a sole proprietor, you no doubt have a company bank account. You can use that money for your business or personal expenses. At the end of the year your CPA will help you determine which part of that money was deductible for business expenses, and which portion was for personal expenses. Often your CPA will find that you spent a lot of money on personal items that are not deductible business expenses. Still, the only consequence to you is that your net profit is higher than you thought, so you owe more in taxes than you expected. Its very different in a corporation. There must be a separate checking account used for business purposes only. Using that money for personal reasons is called commingling of funds, and the consequences are dire. A judge may actually set aside the corporate veil because you ignored the fact that the corporation is a separate legal entity from yourself leaving you totally exposed. Summary: Incorporating your company helps separate your personal identity from that of your business. Sole proprietors and partners are subject to unlimited personal liability for business debt or lawsuits against their company. Creditors of the sole proprietorship or partnership can bring suit against the owners of the business and seize the owners homes, cars, savings, or other personal assets. Once incorporated, the shareholders of a corporation have only the money they put into the company to lose, and usually no more. Additional Benefits of Incorporating Marketing and Joint Venture Advantage Which sounds better : Its the CEO of ABC, Inc on line 1 for you, Bob, or Its the owner/operator (meaning a sole prop) on line 1 for you, Bob? As a new business owner attempting to get through a gatekeeper, every minor advantage helps! So many miss this door-opening opportunity, even though it could spell the difference between prospering and being out of the game in the first 90 days. We have our own policy at NCP regarding JVs. If a sole proprietorship calls and wants to do a JV, that means one of three things: 1. They have no profits in their business. 17www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 22. 2. They dont believe they will succeed, so they didnt spend the money to incorporate. 3. They have a Lets try it out first to see if it works, then incorporate later mentality. Our standard answer is, Thanks for calling, but were unable to work with you right now. Of course, they never hear the real reason they were rejected. Nor will you, because now you know not to make this mistake in the first place. Tax Advantages Deductible Employee Benefits Incorporating usually provides tax-deductible benefits for you and your employees. Even if you are the only shareholder and employee of your business, benefits such as health insurance, life insurance, travel and entertainment expenses may now be deductible. Best of all, corporations usually provide an increased tax shelter for qualified pensions plans or retirement plans (e.g. 401Ks). Easier Access to Capital Funding Its easy to raise capital for a corporation through the sale of stock. Investors are much harder to attract to sole proprietorships and partnerships because of personal liability. Investors are more likely to purchase shares in a corporation, where there is a separation between personal and business assets. (Some banks, as well, prefer to lend money to corporations.) This is not as common at the small business level as it sounds, because the process can be complicated and require the proper attorneys to make sure you are not violating any security laws. Unfortunately, many small businesses seek investors and never consult with a securities attorney. An Enduring Structure A corporation is the most enduring legal business structure. Corporations may continue on regardless of what happens to its individual directors, officers, managers or shareholders. If a sole proprietor or partner dies, the business may automatically end, or it may become involved in various legal entanglements. Corporations can have unlimited life, extending beyond the illness or death of the owners. Easier Transfer of Ownership Ownership of a corporation may be transferred through the sale of stock without substantially disrupting operations or creating the need for complex legal documentation. Anonymity Corporations can offer anonymity to its owners. For example, if you want to open an independent small business and dont want your involvement to be public knowledge, your best choice may be to incorporate. But if you open as a sole proprietorship, its hard to hide the fact that youre the owner. As a partnership, youll probably be required to register your name and the names of your partners with the state and/or county officials in which youre doing business. 18www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 23. Centralized Management With a corporations centralized management, all decisions are made by the board of directors. Shareholders cannot unilaterally make binding agreements on behalf of the business simply because of their investment. With partnerships, each individual general partner may make binding agreements that may result in serious financial difficulty to you or the partnership as a whole. Do I Need An Attorney To Incorporate? An attorney is not a legal requirement to incorporate. You could prepare and file the articles of incorporation yourself. But, you must fully understand all the requirements of your intended state of formation. Thats what NCP is here for. We make sure you know everything you need to know, and give you the tools to make sure youve done everything you need to do. NCP does not require a retainer before you get started. You will receive all the fees up front so you know exactly what you be charged! Costs are not out of control with NCP! In fact, when people hire an attorney to incorporate, the attorney often actually outsources the work to a company like NCP (and then tacks on a $1,000 fee for his trouble!) Working directly with NCP is like buying wholesale instead of retail. This will save you money up front. You can use NCPs service to incorporate and not only save money on attorney fees, but youll rest assured that all forms are filed properly. We recognize that there are areas where an attorney should be retained, especially when it comes to shareholder and buy/sell agreements, raising money, contracts, or to have your documents reviewed. However, NCP will conscientiously inform you any time an attorney should be consulted. If you need a referral, NCP is happy to provide one for you! 19www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 24. Which State is Best to Incorporate Your Business? Oh, yes, like any other subject, there are lots of opinions, and like any subject thereare exceptions to the rule. There is not adequate room to cover every angle in this report, butlets cover the key fundamental points on the top four options. Keep in mind, NCP does incorporate in all 50 states. If you have a higher tolerancefor risk, you may want to consider incorporating in your home state. Either way, NCP canhelp you form your company and protect your assets. The Four Most Common and Best Options: Nevada -The front runner. Nevada Secretary of State Ross Miller has recently (in March 2008) announced plans to amplify Nevadas place in the incorporating marketplace with many changes coming in 2008. His goal is to surpass Delaware for the #1 spot! Delaware The long time stand by, and the most popular, especially for the large East Coast law firms. Going public? Delaware may be your best option (although do not count Nevada out.) Wyoming - The new kid on the block, with slight benefits, but most are irrelevant to legitimate entrepreneurs overall. Your Home State simple, easy, least thought-involved choice --- the biggest default selection. 20www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 25. Taking a Closer Look at Each Option Why Nevada? Lets be real up front. Misconceptions abound when it comes to the supposedadvantages of Nevada incorporation --- that its only good for hiding money, that youllmagically save state income taxes There are exceptions, but most businesses do not fitthem. Every industry and subject has misinformation, and ours is no different. But thathaving been said, dont make a decision until you hear all the facts. Once youve decided to incorporate, the question becomes, Where? For many, thebest choice really is Nevada. Why? Understand the "Circle Of Liability" And Youll Understand the Real Benefit of Incorporating In Nevada! Weve already talked about your dangerous exposure to lawsuits by operating as asole proprietor. By now youre well aware of the unlimited liability you have personally ifyour company is sued, the very real danger of losing your personal assets if you lose thecase, and the extremely high cost of just being involved in litigation, regardless of whetheryou win or lose. You realize that even a frivolous lawsuit can keep you from getting a home or car loan,up your interest rate, bar you from leasing office space The many, many possibleconsequences could spell financial paralysis and doom for your business and your family. Once youve established your corporation or LLC, you know that while businessinsurance may (or may not) help, it cant help you protect the corporate veil --- the shield yourbusiness wields against our litigious world. It only makes sense that if youve gone through the proper steps of incorporation toprotect your personal assets from lawsuits, you want the best assurance possible that noaggressive lawyer can take that protection apart, throwing you once again into The Circle ofLiability. 21www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 26. The Circle of Liability Step 2: Lawsuit! Step 1: Step 3: Did you operate the Incorporate your corporation properly? business = No commingled funds liability protection Separate legal entity Proper Capitalization If not, possible result: Piercing of the entity veil = back to being sued personally/viewed as a sole proprietorship again! Operating Your Business as a Sole Proprietorship= Unlimited personal liability Bad marketing perception Financial Paralysis! As you know, a corporation is a separate legal entity from a sole proprietorship. Thatswhy it has limited liability. But remember, there are three things you must do differently thana sole proprietorship to gain this liability protection: You must maintain corporate minutes and resolutions; You must have proper capitalization; You must NOT commingle business and personal funds. 22www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 27. If the corporation (or LLC) is sued and you havent done these things properly, thesuing party may realize that you have personal assets outside of this entity. They mayattempt to pierce the corporate veil and go after you personally! That means they are attempting to set aside the corporation and say you did notoperate it properly. If they are successful, youre right back to being viewed as a soleproprietorship with UNLIMITED liability and potential financial paralysis! Again, while you can buy errors and omissions (E & O) or business liability insurance,there is NO insurance that will protect the corporate veil. Let me ask you this: if theinsurance company could make money on that kind of insurance, would they sell it to you? Ofcourse they would --- but they dont. What does that tell you? So whats your best move? The very best solution is to incorporate in Nevada.Nevada is very pro-business, and the corporate veil has only been pierced twice in the last 30years in Nevada. There have been many cases where a Nevada corporation did not operate properly(meaning they did not do all of their formalities, thinly capitalized the company and evencommingled funds), yet Nevada protected the corporate veil because the owners did NOTcommit outright fraud. As a business owner, you want to be sure that your hard work, carefulplanning, and conscientious observation of proper business methods will be protected by thelaws of the state you incorporate in. Nevada provides this level of protection. Common Objections: 1. I was told just to incorporate in my home state and keep it simple. Just a reminder: If its simple to set up in your home state, it will be simpler for someone to come after you and go through your entity and after you personally. Simple and asset protection are inversely related. 2. I thought I would save taxes by incorporating in Nevada. Is that all there is, just more protection? This is very common sentiment. I truly must emphasize the challenges with being a sole proprietorship. If you incorporate in your home state and do not operate the corporation properly, you may be right back to being viewed as a sole proprietorship. I cannot stress enough the severity of this problem. If saving on taxes is a great priority, we offer equally great products, such as Sandy Botkins program, to help you accomplish that. But please dont miss the overriding threat to your business. 23www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 28. But My Business Is Halfway Across The Country You may wonder how Nevada incorporation applies to your business when your business operations are NOT in Nevada. The answer is that they dont have to be. Heres how it works: First, incorporate your business in Nevada (in whatever form of corporation or LLC you decide is best for you.) This makes Nevada your domicile. Then register your new corporation in your state of business. This is called foreign registration. You then open a bank account and office in your home state, and your business is off and running. If your company is sued, it will most likely be in your home state. If the plaintiff (the person suing you) wants to go beyond the corporation (or LLC) and after you personally, the case will most likely go back to the state of domicile, which is in this case Nevada where you get the most protection. (Why most likely? We cant control what your local attorney might do. They may want to use your local law to handle your case. Bear in mind that if its simpler for you, its also simpler for someone going after you to get you!) Remember, if you incorporate in a weaker state (without Nevadas protection) and your veil is pierced Thats right. Youre right back where you did not want to be. You will be held personally liable. You might lose the lawsuit and lose many of your personal assets. Plus, you may be financially paralyzed! The Best Investment You Can Make Next question: How much does it cost to incorporate in Nevada first, versus incorporating in your home state only? Without being dismissive, the answer is that you cant afford not to. Youve put in a lot of hours, blood, sweat, and tears to develop your business into your major asset and a significant part of your net worth. If youre like most successful people, you probably work 10, 12, 14 hours per day. Your goal is to protect all your hard work, and the most valuable asset you have. Want numbers? As of this writing, it will cost you about $895 to incorporate in Nevada first, a $500 Nevada fee for foreign registration (plus whatever your home state charges for registration) and only $500 annually for Nevada renewal (this $500 includes our registered agent fees, Nevada Secretary of State fee and the Department of Taxation fee). Keep in mind our competition rarely gives you the complete picture up front. They want to get you in the door first with the appearance of low fees. I dont know about you, but I dont like surprises. (Please call us today at 1-877-515-0505 if you are uncertain about the required eight steps.) 24www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 29. Does that sound like too much money to protect not only the most important asset you (and your family) have, but also the wellbeing of all the employees, contractors, and clients that depend on you? Please dont miss the forest through the trees on this one. This additional investment adds a reinforced foundation to your business! This is what most new businesses will spend on office supplies in the first 30 days. Nevada Corporate Planners has set up over 5,000 business entities in Nevada, providing them with a barrier that protects them from devastating legal repercussions. And just in case you think this risk seems overblown, consider this: In 1990 there were 655,191 lawyers in this country. Today, just eighteen years later, there are more than 1,143,358* active lawyers nationwide. (And let me tell you, they dont call them active for nothing.) * American Bar Association 2007 estimate 25www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 30. 16 Reasons to Incorporate In Nevada 1. Nevada Protects The Corporate Veil. Nevada incorporation offers the best protection of any state against piercing thecorporate veil. (Delaware is very good as well, but doesnt provide as much protection for theboard of directors, which is Reason #2, below.) In fact, the corporate veil has only been pierced twice in Nevada in the last 30 years.Compared to California, where the corporate veil is pierced in one out of two cases, Nevadais like an iron fortress to your creditors. Your attorney may tell you that when you incorporate in Nevada and register inanother state to do business (lets say, California) if you are sued it will be in California, soyou dont need to incorporate in Nevada. But remember, if you get sued and the plaintiffwants to go beyond the corporation (because there isnt enough money or insurance in thecorporation) the plaintiff could try to sue you personally. UNDER THE INTERNAL AFFAIRS DOCTRINE, YOU CAN GO BACK TO THE STATE OFDOMICILE (IN THIS CASE, NEVADA) FOR PIERCING ISSUES. The Internal Affairs Doctrine says that "Courts traditionally look to the law of the stateof incorporation in resolving questions regarding a corporations internal affairs. 2. Nevada Protects The Board Of Directors And Officers. Only SIX states protect the personal liability of both the directors AND officersto their stockholders. Nevada is one of the six states that provide protection in this area,called Inside Liability. In 1987, the Nevada Legislature passed a revolutionary law that permits corporationsto eliminate the personal liability of officers and directors to the stockholders of Nevadacorporations. This is one of the chief reasons large companies like Citibank domicile in Nevada.Although Delaware and a few other states soon adopted lesser versions of this law, Nevadaslaw remains among the most thorough and comprehensive in the country. In fact, attorney Jay Mitton, a national seminar speaker, a.k.a. The Father of AssetProtection, has a Golden Rule for his clients. He requires every one of his clients toincorporate in Nevada first to protect the board of directors. Jay says that its very risky to beon the board of directors in any company, and feels that Nevada protection is a must. We have a client who manages middle-weight boxing champions of different divisions.This manager has his boxers incorporate in Nevada. Why? He uses it as a safeguard,because his boxers can be sued if theyre injured and unable to fight in a promotion inanother state. To date, in every case when the out-of-state promoters tried to carry the case 26www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 31. back to Nevada, the Nevada judges said, We dont recognize that liability in our state. Inother words, just because you might have a judgment found against you in another state, itdoesnt mean it will be in Nevada. A vast majority of states have protection statutes for directors only. These statutesallow corporations to adopt article provisions that eliminate director liability for certainbreaches of fiduciary duty to the corporation. In other words, directors receive protectionautomatically by just filing the articles because of state statute. Only a few states Louisiana, Maryland, New Hampshire New Jersey, and Virginia have laws that apply to officers.2 Nevadas protection is provided as a matter of law; that is, no article provision isnecessary. The protection available for directors is equally applicable to officers.3 In other words, when you file Articles of Incorporation in Nevada, this protection isautomatic, whereas in other states you have to write specific language into the Articles inorder to have this protection. If you file the Articles on your own or through an online Internetcompany, you will not get that protection. In most states, including Delaware, article provisions can only cover directors.4 Whenone is both a director and an officer, actions taken solely in the capacity of an officer are notprotected by a director protection statute.5 Quote: According to David Mace Roberts and Rob Pivnick in Tale of the Corporate Tape:Delaware, Nevada and Texas, (52 Baylor L. Rev. 45 [2000]), "Without doubt on this subject,Nevada is more director- and officer-friendly than either Delaware or Texas" All Nevada corporations now have a Limitation of Liability statement fordirectors and officers imposed by law. In Delaware, thats not the case. When a Delaware corporations articles of incorporation dont contain a limitation ofliability statement, the protection provided for directors from personal liability comes under thebusiness judgment rule. As a substantive rule of law, the business judgment rule says thatThere is no liability for an injury or loss to the corporation arising from corporate action whenthe directors, in authorizing such action, proceeded in good faith and with appropriate care." This being the case, an act of a Delaware corporate director not in good faith, whichrises to the level of "gross negligence," can lead to personal liability if the corporation has nolimitation of liability statement in its articles. When such a statement does exist, acts not ingood faith are still not protected. In Nevada, a director is not liable to the corporation or its stockholders unless a breachof fiduciary duties involves "intentional misconduct, fraud or a knowing violation of law." 6 27www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 32. This is a very high standard according to attorney David Bruno, whose extensiveresearch has found that other states dont abide by this standard. Those 28 states usesimple negligence as their standard of liability. This is a very low standard, and when simplenegligence is found, personal liability will follow.7 However, in Nevada, no director "is individually liable for a debt or liability of thecorporation, unless the . . . director . . . acts as the alter ego of the corporation." 8 3. Nevada Provides Indemnification Of Officers Automatically When Articles Are Filed. As of June 15, 2001, Nevada Revised Statutes (NRS) 78.037(1) allows officers to beautomatically indemnified, whether it is stated in the articles or not. 4. Nevada Has No State Corporate Or Franchise Taxes. Nevada has NO state Corporate Income Tax or Franchise Tax (if you qualify): 9 5. Nevada Does NOT Exchange Information With The IRS. (needs an update) Nevada is one of only two states that does NOT exchange information with the IRS.(However, keep in mind that if you decide to register your company in another state, thatstate will probably exchange information with the IRS.) Here are the facts: Internal Revenue Code (IRC) 6103(a) states that tax "returns and return informationshall be confidential," and that no federal or state employee "shall disclose any return orreturn information obtained by him in any manner." For purposes of this law, a "return" is "anytax or information return," 6103(b)(1), and "return information" means: [A] Taxpayers identity, the nature, source, or amount of his income, payments,receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, taxwithheld, deficiencies, over assessments, or tax payments, whether the taxpayers returnwas, is being, or will be examined or subject to other investigation or processing, or any otherdata, received by, recorded by, prepared by, furnished to, or collected by the Secretary withrespect to a return or with respect to the determination of the existence, or possibleexistence, of liability (or the amount thereof) of any person under this title for any tax, penalty,interest, fine, forfeiture, or other imposition, or offense[.] 6103 (b)(2)(A).Despite the confidentiality of this information: Returns and return information . . . shall be open to inspection by, or disclosure to,any State agency, body, or commission, or its legal representative, which is charged underthe laws of such State with responsibility for the administration of State tax laws for thepurpose of, and only to the extent necessary in, the administration of such laws. 28www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 33. 6103(d). In the above statute, the term "State" means any of the 50 states,Washington, D.C., Puerto Rico, the Virgin Islands, the Northern Mariana Islands, Guam,American Samoa, and the Canal Zone. 6103(b)(5). In order to put 6103 into action, 48 states, Washington, D.C., Guam and AmericanSamoa have entered into "agreements of cooperation" with "the IRS on the exchange ofinformation on taxpayers," according to the CCH Standard Federal Tax Reporter, vol. 15(2002), 36,894.576 at 64,490. Two states that possess no such agreement with the IRS are Nevada and Texas.Id. Update: Assembly Bill 25: Nevada is the first state to adopt a requirement that acompanys record of beneficial ownership must be maintained and available upon request bythe Secretary of State during the course of a legitimate criminal investigation. The entity mustfurther respond to any interrogatories that would assist in the investigation. Companies notcomplying with the provisions could have their charter suspended or revoked by theSecretary of State. "This legislation strikes at the heart of the fraudulent practices but doesnot pose a barrier to legitimate commerce," said Secretary Miller. Also a part of AB25, Nevada prohibits the use of controversial "bearer shares," whichallow the trading of company stock in bearer form by attributing stock ownership to whoeverphysically holds the shares. For years, NCP has stated that this protection strategy does notwork. 6. Nevada Has Low Fees. Nevada has low fees, especially taking into account all the benefits they offer. Filing fees with the state of Nevada are reasonable at $125, while California is $800 and Massachusetts is $500. 7. A Nevada Corporation Or LLC May Be Thinly Capitalized. Cases as low as $200 10 have been deemed acceptable capitalization levels in Nevada. However, in other states such as California, this amount was deemed too thinly-capitalized, which caused the corporate veil to be pierced. 8. Nevada Offers The Best Protection Of Board Of Directors From Shareholder Lawsuits. In order to find the Board of Directors liable, the shareholders must prove gross negligence on behalf of the Board of Directors. In Nevada proving gross negligence is necessary in order to pierce the corporate veil. No other state has such a high test! 9. In Nevada, You Must Only Have A Legal Purpose To Form A Corporation Or LLC. 29www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 34. If you form an LLC, these provisions are critical. You must know whether the state of formation requires simply a legal purpose, or a more detailed legal purpose. This is especially important when you form an LLC that will mainly hold safe assets. Nevada is one of the states that only require a legal purpose. Currently, 14 states (California, Indiana, Iowa, Louisiana, Maryland, Michigan,Minnesota, New York, North Dakota, Oregon, Pennsylvania, Rhode Island, Texas, andVirginia) require a business purpose in order to form an LLC. Because of this, an LLC cannotbe used to hold an asset to protect it from creditors, unless that is deemed a businesspurpose in that state. Each of these states defines the term legal purpose in its own way. Since an attemptto form an LLC in any of these states without such a purpose is invalid (and the applicationpresumably would be rejected by the Secretary of States office) its not possible to form anLLC in these states without the requisite purpose. And, of course, if an LLC is formed in one of the states above and performs businessin another state, that states business license statutes become applicable. In the other 36 states, an LLC can be formed for "any lawful purpose" which includesholding personal assets. Thus, a person could form a Nevada LLC to hold personal assets,and if no business is performed, the business license statutes will not come into play. Thisprovides an extra layer of privacy not found in the above-named 14 states. 10. In Nevada, There Is NO Joint And Several Liabilities. The other significant change in Nevada law is the abolishment of joint and several liabilities. Joint and several liability means that should a judgment be entered against several defendants, they will each assume equal liability for the full amount of the judgment, regardless of their relative fault in causing the damages. Nevada now requires the court to assign a percentage of faults to each defendant, from zero to one hundred, with the total equal to 100 percent. Every defendant found liable is required to pay a share of the total judgment, no greater than his or her fault. 11. Nevada Only Requires The List Of Officers To Be Updated Annually. If your officers change throughout the year, the corporation is not required to update the Secretary of State every time a change is made. The corporation may update it (which requires a fee) or wait until the corporations annual renewal is due. 12. In Nevada, One Person Can Hold ALL The Corporate Positions. One person can hold the offices of President, Secretary, Treasurer, and be the sole Director in Nevada. Many states require at least three officers and/or directors. That means you dont need to bring other people into your Nevada corporation if you dont want to. 13. Nevada Does NOT Require The Members To Be Listed In State Records. 30www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 andreceive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTERIncorporating! and a 30 minute free consultation, a $200 value plus a special one time offer afteryou call! 35. If an LLC is MANAGED BY MANAGERS (the only way that makes sense), the owners arent required to be listed. In other states that may not be the case. If you want to protect the identity of the ownership of your L