The Insiders Guide To Incorporating And Protecting Your Assets 10 15 09

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Dedicated to Your Success!

Scott Letourneau
CEO

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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. LETOURNEAU
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
NEVADA CORPORATE PLANNERS ...............................................................................1
DISCOVER HOW YOUR COMPANY CAN SURVIVE THE ODDS AND RANK IN THE RARE 5%
THAT ARE STILL IN BUSINESS AFTER FIVE YEARS!.......................................................3
DID YOU START YOUR BUSINESS WITH A DREAM OR A VISION?
NCP HELPS YOU MAKE IT A REALITY FASTER
THAN ANYONE ELSE!
4
HAVE YOU MASTERED THE FASTEST WAY TO GROW
YOUR COMPANY? .................................................................................................5
COULD YOU USE A BUSINESS LINE OF CREDIT.............................................................6
(NOT TRADE CREDIT) OF UP TO $100,000?................................................................6
ESTABLISHING THE PROPER FOUNDATION FOR YOUR BUSINESS ......................................8
IS YOUR KEY TO SUCCESS!.....................................................................................8
WHY INCORPORATE?..............................................................................................9
SOLE PROPRIETORS ARE ROLLING THE DICE...............................................................9
INSURANCE IS NOT A FOOL-PROOF SAFETY NET .......................................................14
DON’T EXPECT SYMPATHY FROM THE COURTS, EITHER................................................14
BE SURE TO PLAY BY THE RULES..........................................................................15

ADDITIONAL BENEFITS OF INCORPORATING..................................................................17
DO I NEED AN ATTORNEY TO INCORPORATE?...........................................................19
WHICH STATE IS BEST TO INCORPORATE YOUR BUSINESS?...........................................20
TAKING A CLOSER LOOK AT EACH OPTION… ............................................................21
WHY NEVADA?
21
Understand the "Circle Of Liability™" And
You’ll Understand the Real Benefit of
Incorporating In Nevada! ................................................................................................................21
THE BEST INVESTMENT YOU CAN MAKE...................................................................24
16 REASONS TO INCORPORATE IN NEVADA................................................................26
WHAT’S MY BEST CHOICE: NEVADA OR DELAWARE?..................................................32
CHOICE OF ENTITY COMPARISON.............................................................................38
Taxation............................................................................................................................................38
Fringe Benefits..................................................................................................................................38
Tax Form Filed.................................................................................................................................38
Tax Year End.....................................................................................................................................38
Foreign Owners................................................................................................................................38

Charging Order................................................................................................................................38
Taxed at State Level..........................................................................................................................38
Save SE taxes....................................................................................................................................38
Double Taxation................................................................................................................................38
PSC Problems...................................................................................................................................38
Management......................................................................................................................................39
WHAT FACTORS AFFECT YOUR ENTITY CHOICE? ........................................................40
WHAT DOES NCP HAVE TO OFFER THAT OTHER ENTITY-FORMING SERVICES DO NOT?...40
HERE ARE A FEW CRITERIA TO LOOK FOR WHEN SELECTING
A COMPANY TO HELP YOU START YOUR BUSINESS:
44
SEVEN CRITERIA THE COMPANY YOU CHOOSE MUST MEET .........................................45
BEFORE YOU LET THEM FORM YOUR
NEXT CORPORATION OR LLC!................................................................................45
A SUMMARY OF THE KEY TAX LAW CHANGES FOR 2009!............................................47
STANDARD MILEAGE RATE.....................................................................................49
WHAT MUST YOU CONSIDER WHEN SELECTING THE
BEST ENTITY FOR YOUR BUSINESS?........................................................................52
LLC PARTNERSHIP ILLUSTRATION............................................................................52
FOUR VITAL AREAS..............................................................................................61
TO SUPPORT YOU AND HELP YOUR BUSINESS GROW:................................................61
WHAT’S THE MOST COMMON REASON FOR
BUSINESS FAILURE? ............................................................................................65
STEP 1: FAST START TO INCORPORATE YOUR BUSINESS! ...........................................73
STEP 2: FAST START SUPPORT TOOLS TO HELP YOUR BUSINESS GET OFF TO A FAST
START TO PROFITS AND STAY AHEAD OF YOUR COMPETITION!......................................77
STEP 3: FAST START BUSINESS FOUNDATIONAL SERVICES TO INVEST IN AND HELP YOUR
BUSINESS GET OFF TO A FAST START TO PROFITS! ..................................................80
STEP 4: FAST START PROFESSIONAL REFERRALS-TAXES AND LEGAL, MERCHANT ACCOUNT,
PAYROLL, CASH ADVANCE, CREDIT REPAIR AND RETIREMENT PLANNING! .....................86
STEP 5: FAST START PROFITS FOR YOUR BUSINESS-MAKE NCP ANOTHER PROFIT CENTER
FOR YOUR BUSINESS!...........................................................................................86

STEP 6: FAST START TO JOINT VENTURES!
........................................................................................................................87
STEP 8: VISIT OUR FAST START BLOGS AND LEAVE YOUR COMMENTS: .........................90
STEP 10: UPCOMING FAST START EVENTS FOR YOUR BUSINESS!.................................91
WANT TO ADD ANOTHER $500 TO YOUR BANK ACCOUNT EACH MONTH? $1,500?
$2,500? WITHOUT BREAKING A SWEAT?................................................................94
WHAT DO OTHERS SAY ABOUT DOING BUSINESS WITH NCP?.....................................95
READY TO GET YOUR BUSINESS OFF TO A FAST START?...........................................100
BECOME AN AFFILIATE PARTNER WITH NCP:...........................................................101

"Hi. I'm 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 Planners
Over 12 years ago, Scott Letourneau founded Nevada Corporate Planners, Inc. and Fast
Business 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 Nevada
corporations and entity structuring, but also creating and structuring entities nationwide.
To his 5,000+ clients, Mr. Letourneau's expertise has allowed them to incorporate with
confidence 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 author
of "The Top Costly Mistakes to Avoid When Incorporating".
He has appeared on CNN Headlines News with Pat Summerall's Success Stories and has
also been interviewed by Channel 8 News, in Las Vegas, and various radio stations
throughout North America for his expertise and experience.
He was a contributing author in the book released in 2008 by Entrepreneur Magazine, Start
Your Own Information Marketing Business!!
Scott is a rare combination of the best training from Tony Robbins, Dan Kennedy, Michael
Gerber and Jay Abraham all wrapped into one speaker (coach).
Mr. Letourneau is happily married to De Ann, an amazing classical violinist, and a proud
father of three beautiful girls, Gracie, Rosie and Faith!

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www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 and
receive a Bonus GUIDE, a $47 value, The Top 20 Costly Mistakes BEFORE And AFTER
Incorporating! and a 30 minute free consultation, a $200 value plus a special one time offer after
you call!

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
you’ve 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).

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you call!

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 in
comprehensive research and streamlined systems to help your business get off to a fast start
than anyone else… because I want you to be one of the TOP 5% that are still in business
and thriving after five years!
If your goal is to protect your assets or determine the best entity or structure for your
new partnership, business, real estate opportunity… you’ve come to the right place. Not only
does NCP track cutting-edge research to give you the best information on which entity is
optimal for your needs, but we have also created one of the most comprehensive networks of
professional resources in the U.S. to keep you moving in the right direction.
That correctly-focused forward momentum is crucial in our challenging business world
today. As if cutthroat competition, a fluctuating marketplace, and the double-edged sword of
the new global economy weren’t enough, forces threaten from outside your business as
well…
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 BILLION
SHORT in tax collections --- and that their biggest culprit was NOT large corporations.
They’ve 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 tax
return 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, you’ll discover why sole proprietorships are such huge IRS
targets. 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,

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these well-intentioned (yet naive) sole proprietors stubbornly cripple themselves even more
by 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 you
one of the 500,000 every month looking to start a business? Perhaps you will become an
Awakened Entrepreneur, as Michael Gerber describes in his recent book, Awakening the
Entrepreneur Within. (Be sure to listen to my timeless interview with Michael Gerber, a
valuable bonus that you’ll receive as a new NCP client that will inspire you to take your dream
to a new level.)
Perhaps, your dream for your new business is to provide quality services to your
clients and make a difference in your marketplace. You’re no doubt excited, yet maybe
feeling a bit overwhelmed. You may have the ability to start a successful business, yet may
not 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 I
started NCP. I was on a mission to provide top-quality service for those who wanted to
incorporate in Nevada. I considered it my duty to dispel the misinformation that was so
prevalent back then (and still is) about this valuable, yet misunderstood strategy.

Believe me; I know what it’s like to be an entrepreneur. Over the last eleven years, I
have invested an enormous amount of money with many top professionals to ensure
conscientious, 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 the
way, especially in the HR and employee area.

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Have you Mastered the Fastest Way to Grow
Your Company?
Then I began studying with the world’s top business experts, including Jay
Abraham, Chet Holmes, Dan Kennedy, Michael Gerber and Tony Robbins. I hired mentors in
HR and leadership to help take NCP to a whole new level. We’ve done so much more than
survive the odds for the past twelve years --- we have prospered. We now have more
opportunity 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 Advertising
Donald Trump's attorney Guru, Bill Glazer
and business negotiator

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After implementing many of the strategies that I learned from these experts, NCP has
become 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 me
to tailor our services and to transform NCP into what I call a “Launch Pad for Business
Success.” 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. I
have walked in your shoes. I know what you’re facing. The effort may be massive, but your
results can be, too --- with the proper support.

Today, I actively mastermind and personally network with most of the top marketing
and Internet professionals in the world. I work closely with hundreds of other top growth
experts, regularly attend many of the top seminars worldwide, and invest thousands each
year to stay on the cutting edge of strategy and information.

I’ll gladly do whatever I can to gain your trust as our client. I know what’s being offered
out there, and can confidently say that no company comes close to our overall passion and
commitment. We’ve assembled the most comprehensive wealth of cutting edge resources
and strategies, any one of which can help steer you on the path to success faster, with less
risk, and as efficiently as possible. Here’s 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 BANK’S CODE to
obtaining Lines of Credit (REAL CASH) for your business! As an NCP client you’ll learn
these valuable secrets, get capital when you need it, and avoid the number one reason for all
new business’ failure: lack of cash flow. We don’t want to see you become just another
statistic --- one of the 80-99% that fail in the first five years! In fact, that cash infusion can
provide the marketing dollars to propel your business to the next level.

I’ve shared just a few of the many ideas I have to help your company not only get
started, 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 at
1-877-515-0505. Mention that you have downloaded our FREE GUIDE and ask for our
special bonus, yours just for calling!!

Have a prosperous day!
Scott Letourneau

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CEO, Nevada Corporate Planners

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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 you’re wondering, “How can I be sure I’m choosing the
right 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” their
company against today’s ultra-competitive business climate. If you’re like most, you’ve
probably asked yourself the questions above... or maybe you haven’t yet decided whether
incorporation is right for you. Maybe you’re still wondering…

• Why incorporate at all? And why in Nevada, versus in my home state?
• What are Nevada’s 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-Corporation…C-Corporation…LLC… What’s 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?
• Let’s 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 solid
starting point for one of the most important decisions you’ll ever make to ensure the
security, resilience, and prosperity of your business.

We at NCP know that if you understand the importance of incorporation and have a
firm grasp on all of your options, you’ll undoubtedly see the value of the services we offer.

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The information here is only a small part of the contribution that NCP will make to your
business, both in the incorporation phase and beyond. But let’s get right down to business…
Why Incorporate?
First, let’s look at the basic question at hand: Why bother with incorporation at all?

If you’re like many small business owners, right now you’re operating as a sole
proprietorship. That’s probably not because you’ve chosen to, but because you don’t
consider your business large or sophisticated enough to need to incorporate – or maybe
you’ve never thought about it at all.

If you’re lucky, you’ll never have to pay the price for putting off that crucial next step…
but that’s a very dangerous “if.”

Sole Proprietors Are Rolling the Dice
In today’s ultra-competitive and dangerously litigious business climate, you can’t afford
to throw the dice with your most valuable asset. Your exposure is far greater than you may
think, both personally and professionally. As a sole proprietor, regardless of the size of your
business, you personally have unlimited liability if your company is sued. You could
actually 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 don’t have to incorporate
until they reach a certain profit level – say, $30,000. She thinks this is madness – and we
couldn’t 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. It’s pretty twisted logic to think that a small
business can absorb that financial blow better than a larger one.

Worse, most people are naively unaware of what can happen to them, both
professionally and personally, if their business is hit with even a frivolous lawsuit. Here are
just a few things you would struggle with, or be completely unable to do if your
business 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. (We’ll explain why in a
moment.) At best, you’d have to pay a much higher interest rate,
because you’re 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.

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Why do lawsuits cause such a problem with loans? If you haven’t recently applied for a
home loan, a second, or financing for a car, you may not be aware of how times have
changed. 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. They’ve tightened up the system
that they use to rate levels of risk for loan applicants. Today’s loan applications ask a very
different question: “Are you currently involved in a lawsuit?” That means that if anyone
tries to sue you for any reason, frivolous or not, at the very least you’ll be rated as a much
higher risk. (Remember, that’s before the suit is even decided.) And that translates to a lot
of 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 on
a pavement crack in your business’ parking lot? And just imagine what being unable to lease
office space could do to your business…

Creating a legal entity separates the business from you personally, so that any legal
action 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 to
have a sole proprietorship unless you have no assets or future assets coming… in which
case you shouldn’t – and wouldn’t – be in business at all.

Sole Proprietors Are Risking Their Personal Credit
And Capability For Future Financing!
You may already be thinking, “I don’t plan to have a sole proprietorship… I’m
convinced that I need to form an entity.” But when will you take action? If you wait 30 days or
longer, do you realize the negative impact that may have on your business? Although it’s not
impossible for a lawsuit to pop up in that short period, a MUCH bigger (and disturbingly
common) mistake lurks at this important business start-up phase…

Using your personal credit cards to finance the start-up of your business is the most
widespread mistake made. Added to the folly of operating as a sole proprietorship with a
“let’s see how we do first before we incorporate” mentality, it’s a recipe for disaster. Here’s
why:

Financing your business with your personal credit (credit cards, home equity line of
credit, etc.) negatively affects your “revolving debt ratio.” That ratio is a major factor in your
new corporation or LLC’s ability to obtain a business credit card at the start,,, and later, a
business line of credit.

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Why is this so important? The number one reason business owners fail, especially
during the first six months, is lack of cash flow. That’s when the folly of overestimating
revenue and underestimating expenses rears its ugly head. And for most small business
owners, that behavior is as predictable as the sun.

NCP is one of the few, if not the only company that literally “Cracked the Bank’s Code”
on business lines of credit for you. We spent more than four months going back and forth
with a major bank to figure out exactly how they make their decisions as to who gets those
valuable lines of credit, how much… and who does not.

Factors such as the “liquid credit score,” the risk category of your business, gross
revenues, your personal credit score, derogatories, and your revolving debt are all taken into
consideration.

Here’s the bottom line: If you’re starting your business by nearly or completely maxing
out your credit cards, the bank will ignore you. Even with a 700 personal credit score, if your
revolving debt is close to 90% maxed out, that sends the bank a very clear message that you
cannot manage your personal debt. Why give you money to start a business? Basically,
you’re on your own financially.

Don’t be misled by TV or Internet ads about “corporate credit,” either. Usually, they
refer to “trade lines of credit,” which doesn’t give you actual cash for you to use in your
business as you choose. Now, if you’re building homes or have more than 30 employees,
developing trade credit can be important --- but it’s still not cash. You can’t use trade credit to
make payroll, nor to spend on pay-for-click advertising or any of the many other strategies
you 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.
That’s key advice as your business gets started. Remember, when your corporation
or LLC applies for a business line of credit, half of the bank’s formula in determining eligibility
is your personal credit score --- and most importantly, the revolving debt ratio.

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Sole Proprietorships Are 300% More Likely To Be
Audited By The IRS Even By Las Vegas Standards, Those
Are Incredible Odds!

Fact: Sole proprietorships are currently being targeted by the IRS. Why? In a
self-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 offenders
were not large corporations, but rather small business owners who owed somewhere around
70% of that $300 billion. Of that group, 1/3 were sole proprietorships. You can bet the IRS
isn’t going to ignore that low-hanging fruit! In fact, you are 300% more likely to be audited if
you file a Schedule C.

Is Your Business a Hobby, or a Business?
Most people enjoy a hobby --- golf, tennis, cooking --- and while they’ll spend money
on those activities, they’re not a business. Yet when most people join a business opportunity
or start a business, though they don’t consider it a hobby, that’s often actually what they
create because they don’t know the rules of the game.
But they have a problem: The IRS is getting much tougher on this subject. The
number one reason the IRS goes after business owners is the failure to use proper analytical
records. You’d be well advised to use software like QuickBooks® to determine how your
business 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 bank
balance as their only business financial barometer. First, that’s the wrong way to make
financial decisions. Second, it sends the IRS a very clear message: you are NOT serious
about your business. This single mistake may cause the IRS to consider your business as a
hobby. If they do, you cannot write off your hobby’s losses against your earned income ---
and that kills one of the biggest reasons to start a business in the first place.

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67% Of All U.S. Businesses Operate As
Sole Proprietorships…
If Your Clients Are Business Owners, How Do You
Protect Yourself?
If everything we’ve told you is true (and it is), how do you keep your own business
safe? 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
there’s 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: I’m a good person, and I have insurance. Why would anyone
sue me? That’s admirable, but that’s not how the game is played.
Desperate people don’t care if you’re a “good person.” If you have money ---
or the perception of money --- you’re a potential target!

Don’t bury your head in the sand. Now that you’re aware of the pitfalls, take
action yourself --- and arm your clients as well --- with the tools and information to be
successful. After all, it’s 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. Let’s go a little deeper…

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Insurance Is Not A Fool-Proof Safety Net
Even though many professionals tell you that you’re protected by insurance, you can
still spend a lot of money defending a lawsuit without ever having a claim against your
insurance policy.

But what if a claim is made? Insurance may provide some level of protection – but
worst case, that protection may be only as good as the legal representation you can afford. (I
can’t tell you how many clients have found that their insurance companies weren’t nearly as
friendly 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, and
even officers’ and directors’ insurance --- and again, a good policy should provide some
protection. But NONE of those will help you protect the corporate veil (a hugely important
benefit that we’ll talk about more later.) In fact, there is NO insurance policy in existence that
can do that.

If you have a smaller insurance claim of, say, $10,000, your insurance company will
usually pay it. However, if you have a claim for $900,000… put the coffee on, because you
can expect a visit from your insurance company’s attorneys. Why? To find a loophole in
your policy so they don’t have to cover you. And of course, even if they do cover you, your
rates will skyrocket – if your policy isn’t cancelled!

Don’t Expect Sympathy from the Courts, Either
Are you a landlord now, or do you have plans to own real estate in the future? If
you’re ever sued, remember that juries are made up mostly of tenants... jealous tenants who
don’t own a house – and yet you have several. This is their chance to get even with every
landlord who ever hit them with a late rent charge or made them get rid of that pet. It’s pay-
back time! Is it fair? No – but it’s human nature.
And consider this: Most judges earn less than you do. How sympathetic could they
possibly be? You might as well just hand over your checkbook and the title to one of your
houses – unless you know NCP’s asset protection strategies.
The bottom line? Win or lose, even with insurance, you could become financially
paralyzed by being a sole proprietor.

Does it make sense to leave yourself exposed? Of course not, especially when the
solution is not complicated, sophisticated, or reserved for the AT&T’s of the world. The
solution is to incorporate! Creating a legal entity separates you from your business so that
any legal action will not affect you personally.

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Here’s 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 helps
people perceive you as larger than you actually may be. Plus, it adds to your credibility – as
well it should. It shows that you’re aware of the pitfalls lurking out there, you’ve done your
homework, and you’ve taken the appropriate steps to protect yourself and your company.
You’ll be around next year, and the year after that. And that message to the marketplace
translates to a very direct effect on your bottom line.

Be Sure To Play By the Rules
It’s essential to do things properly when you incorporate. Remember, when your
company incorporated, you created a separate legal entity from you personally. It’s
imperative that your corporation is treated as such. If the corporation is sued and there aren’t
enough assets or insurance, the plaintiff may decide to go through the corporation and after
you personally. This is called “piercing the corporate veil,” and the consequences to you
can 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.

Let’s take a closer look at how these three requirements can be breached or
compromised:

1. Lack of corporate formalities. Here’s 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 you’re 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 doesn’t 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.

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We’ve 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.
(We’re 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. They’ve adopted
a sort of “20/20 hindsight” in some situations, and companies in high-liability sectors
like manufacturing are especially at risk.

For example, let’s say you’re a widget maker with five employees and you’re
capitalized at $50,000 and have a $1 million insurance policy - which is appropriate,
because widgets are cheap and you don’t 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 he’d want. Since you only have
$50,000 in capitalization, we’re going to consider your company too thinly capitalized.
Therefore, we’re 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.

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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.

It’s 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 : “It’s the CEO of ABC, Inc on line 1 for you, Bob,” or “It’s 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.

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2. They don’t believe they will succeed, so they didn’t spend the money to incorporate.
3. They have a “Let’s try it out first to see if it works, then incorporate later” mentality.
Our standard answer is, “Thanks for calling, but we’re 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. 401K’s).
• Easier Access to Capital Funding
It’s 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 don’t want your involvement to be
public knowledge, your best choice may be to incorporate. But if you open as a
sole proprietorship, it’s hard to hide the fact that you’re the owner. As a
partnership, you’ll probably be required to register your name and the names of
your partners with the state and/or county officials in which you’re doing
business.

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• Centralized Management
With a corporation’s 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. That’s what NCP is here for. We make sure you
know everything you need to know, and give you the tools to make sure you’ve 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 NCP’s service to incorporate and not only save money on attorney
fees, but you’ll 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!

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Which State is Best to Incorporate Your Business?
Oh, yes, like any other subject, there are lots of opinions, and like any subject there
are exceptions to the rule. There is not adequate room to cover every angle in this report, but
let’s 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 tolerance
for risk, you may want to consider incorporating in your home state. Either way, NCP can
help 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 Nevada’s 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.

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Taking a Closer Look at Each Option…

Why Nevada?
Let’s be real up front. Misconceptions abound when it comes to the supposed
advantages of Nevada incorporation --- that it’s only good for hiding money, that you’ll
magically save state income taxes… There are exceptions, but most businesses do not fit
them. Every industry and subject has misinformation, and ours is no different. But that
having been said, don’t make a decision until you hear all the facts.

Once you’ve decided to incorporate, the question becomes, “Where?” For many, the
best choice really is Nevada. Why?

Understand the "Circle Of Liability™" And
You’ll Understand the Real Benefit of
Incorporating In Nevada!

We’ve already talked about your dangerous exposure to lawsuits by operating as a
sole proprietor. By now you’re well aware of the unlimited liability you have personally if
your company is sued, the very real danger of losing your personal assets if you lose the
case, and the extremely high cost of just being involved in litigation, regardless of whether
you 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 possible
consequences could spell financial paralysis and doom for your business and your family.

Once you’ve established your corporation or LLC, you know that while business
insurance may (or may not) help, it can’t help you protect the corporate veil --- the shield your
business wields against our litigious world.

It only makes sense that if you’ve gone through the proper steps of incorporation to
protect your personal assets from lawsuits, you want the best assurance possible that no
aggressive lawyer can take that protection apart, throwing you once again into “The Circle of
Liability™”.

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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. That’s
why it has limited liability. But remember, there are three things you must do differently than
a 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.

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If the corporation (or LLC) is sued and you haven’t done these things properly, the
suing party may realize that you have personal assets outside of this entity. They may
attempt to pierce the corporate veil and go after you personally!

That means they are attempting to set aside the corporation and say you did not
operate it properly. If they are successful, you’re right back to being viewed as a sole
proprietorship 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 the
insurance company could make money on that kind of insurance, would they sell it to you? Of
course they would --- but they don’t. What does that tell you?

So what’s 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 30
years 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 even
commingled funds), yet Nevada protected the corporate veil because the owners did NOT
commit outright fraud. As a business owner, you want to be sure that your hard work, careful
planning, and conscientious observation of proper business methods will be protected by the
laws 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 it’s 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 Botkin’s program, to
help you accomplish that. But please don’t miss the overriding threat to your
business.

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“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 don’t have to be.

Here’s 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 can’t control what your local
attorney might do. They may want to use your local law to handle your case. Bear in mind
that if it’s simpler for you, it’s also simpler for someone going after you to get you!)

Remember, if you incorporate in a weaker state (without Nevada’s protection) and
your veil is pierced… That’s right. You’re 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
can’t afford not to.

You’ve 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 you’re 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 don’t know about you,
but I don’t like surprises. (Please call us today at 1-877-515-0505 if you are uncertain
about the required eight steps.)

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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 don’t 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 don’t call them “active” for
nothing.)

* American Bar Association 2007 estimate

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16 Reasons to Incorporate In Nevada
1. Nevada Protects The Corporate Veil.

Nevada incorporation offers the best protection of any state against piercing the
corporate veil. (Delaware is very good as well, but doesn’t provide as much protection for the
board 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, Nevada
is like an iron fortress to your creditors.
Your attorney may tell you that when you incorporate in Nevada and register in
another state to do business (let's say, California) if you are sued it will be in California, so
you don't need to incorporate in Nevada. But remember, if you get sued and the plaintiff
wants to go beyond the corporation (because there isn’t enough money or insurance in the
corporation) the plaintiff could try to sue you personally.
UNDER THE INTERNAL AFFAIRS DOCTRINE, YOU CAN GO BACK TO THE STATE OF
DOMICILE (IN THIS CASE, NEVADA) FOR PIERCING ISSUES.

The Internal Affairs Doctrine says that "Courts traditionally look to the law of the state
of incorporation in resolving questions regarding a corporation's internal affairs.”
2. Nevada Protects The Board Of Directors And Officers.
Only SIX states protect the personal liability of both the directors AND officers
to 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 corporations
to eliminate the personal liability of officers and directors to the stockholders of Nevada
corporations.
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, Nevada's
law 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 Asset
Protection,” has a “Golden Rule” for his clients. He requires every one of his clients to
incorporate in Nevada first to protect the board of directors. Jay says that it’s very risky to be
on 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 they’re injured and unable to fight in a promotion in
another state. To date, in every case when the out-of-state promoters tried to carry the case

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back to Nevada, the Nevada judges said, “We don’t recognize that liability in our state.” In
other words, just because you might have a judgment found against you in another state, it
doesn’t mean it will be in Nevada.
A vast majority of states have protection statutes for directors only. These statutes
allow corporations to adopt article provisions that eliminate director liability for certain
breaches of fiduciary duty to the corporation. In other words, directors receive protection
automatically 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
Nevada's protection is provided as a matter of law; that is, no article provision is
necessary. The protection available for directors is equally applicable to officers.3
In other words, when you file Articles of Incorporation in Nevada, this protection is
automatic, whereas in other states you have to write specific language into the Articles in
order to have this protection. If you file the Articles on your own or through an online Internet
company, you will not get that protection.
In most states, including Delaware, article provisions can only cover directors.4 When
one is both a director and an officer, actions taken solely in the capacity of an officer are not
protected 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 for
directors and officers imposed by law. In Delaware, that’s not the case.

When a Delaware corporation's articles of incorporation don’t contain a limitation of
liability statement, the protection provided for directors from personal liability comes under the
business judgment rule. As a substantive rule of law, the business judgment rule says that
“There is no liability for an injury or loss to the corporation arising from corporate action when
the 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, which
rises to the level of "gross negligence," can lead to personal liability if the corporation has no
limitation of liability statement in its articles. When such a statement does exist, acts not in
good faith are still not protected.
In Nevada, a director is not liable to the corporation or its stockholders unless a breach
of fiduciary duties involves "intentional misconduct, fraud or a knowing violation of law." 6

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This is a very high standard according to attorney David Bruno, whose extensive
research has found that other states don’t abide by this standard. Those 28 states use
“simple negligence” as their standard of liability. This is a very low standard, and when simple
negligence is found, personal liability will follow.7
However, in Nevada, no director "is individually liable for a debt or liability of the
corporation, 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 be
automatically 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, that
state will probably exchange information with the IRS.) Here are the facts:
Internal Revenue Code (IRC) ß 6103(a) states that tax "returns and return information
shall be confidential," and that no federal or state employee "shall disclose any return or
return information obtained by him in any manner." For purposes of this law, a "return" is "any
tax or information return,"
§6103(b)(1), and "return information" means:
[A] Taxpayer's identity, the nature, source, or amount of his income, payments,
receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax
withheld, deficiencies, over assessments, or tax payments, whether the taxpayer's return
was, is being, or will be examined or subject to other investigation or processing, or any other
data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with
respect to a return or with respect to the determination of the existence, or possible
existence, 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 under
the laws of such State with responsibility for the administration of State tax laws for the
purpose of, and only to the extent necessary in, the administration of such laws.”

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§ 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 American
Samoa have entered into "agreements of cooperation" with "the IRS on the exchange of
information 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 a
company's record of beneficial ownership must be maintained and available upon request by
the Secretary of State during the course of a legitimate criminal investigation. The entity must
further respond to any interrogatories that would assist in the investigation. Companies not
complying with the provisions could have their charter suspended or revoked by the
Secretary of State. "This legislation strikes at the heart of the fraudulent practices but does
not pose a barrier to legitimate commerce," said Secretary Miller.
Also a part of AB25, Nevada prohibits the use of controversial "bearer shares," which
allow the trading of company stock in bearer form by attributing stock ownership to whoever
physically holds the shares. For years, NCP has stated that this protection strategy does not
work.

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.

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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, and
Virginia) require a business purpose in order to form an LLC. Because of this, an LLC cannot
be used to hold an asset to protect it from creditors, unless that is deemed a business
purpose in that state.
Each of these states defines the term “legal purpose” in its own way. Since an attempt
to form an LLC in any of these states without such a purpose is invalid (and the application
presumably would be rejected by the Secretary of State's office) it’s not possible to form an
LLC in these states without the requisite purpose.
And, of course, if an LLC is formed in one of the states above and performs business
in another state, that state's business license statutes become applicable.
In the other 36 states, an LLC can be formed for "any lawful purpose" which includes
holding 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. This
provides 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 corporation's 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 don't need to bring other people into your Nevada corporation if you don’t
want to.

13. Nevada Does NOT Require The Members To Be Listed In State Records.

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If an LLC is MANAGED BY MANAGERS (the only way that makes sense), the owners
aren’t 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 LLC from the public, Nevada makes that
possible.
14. Nevada Does NOT Require Stockholders, Directors And Officers To Be U.S.
Citizens, Or To Live Or Hold Meetings In Nevada.
Directors need not be stockholders and officers, and Directors of a Nevada corporation
can live and work elsewhere.

15. Nevada Corporations May Purchase, Hold, Sell Or Transfer Shares Of Its
Own Stock.

16. Nevada May Issue Stock for Services.
Nevada corporations may issue stock for capital, services, personal property, or real
estate, including leases and options. The directors may determine the value of any of
these transactions, and their decision is final.
1
Remme v. Herzog, 35 Cal. Rptr. 586, 222 Cal. App. 2d 863 (1964)($157,000 in capitalization
2
Hagglund, et al., supra, at 9.
3
See Nevada Revised Statutes 78.138(7)
4
See Delaware Gen. Corp. Law § 102(b)(7); Cal. Corps. Code § 204(a)(10)
5
See Arnold v. Society For Savings Bancorp, Inc., 650 A.2d 1270 1288 (Del. 1994.
6
NRS 78.138 (7).
7
See Theriot v. Bourg, 691 So.2d 213 (La. App.), writ denied, 696 So.2d 1008 (La. 1997) (a series of bad
business decisions led to personal liability for five directors in the amount of $5,798,441.
8
NRS 78.747(1)
9
In order to take advantage of the tax laws of Nevada, your company must have employees in Nevada.
10
Paul Steelman, Ltd. v. Omni Realty Partners, 110 Nev. 1223, 885 P.2d 549 (1994).

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What’s My Best Choice: Nevada or Delaware?
The main rights in Delaware law benefit shareholders of public corporations. This
attracts large public companies that trade on various exchanges across the country to
provide the best protection to their shareholders. Delaware’s corporate law, with regard to
corporate takeovers, is the strongest in the US. However, for everyone else, the following
chart illustrates several benefits of Nevada over Delaware:

Nevada vs. Delaware
It’s No Secret: Nevada Beats Delaware
Nevada’s liberal incorporation laws offer more privacy and less disclosure than
the once popular Delaware, making it the most advantageous state in which to
incorporate. Here are some of the specific differences:

Nevada Delaware

State Corporate Tax No 8.7%*

Disclosure of principal business
No Yes
location outside Delaware
Report actual number and value
No Yes
of stock listed
Freely exchanges information
No** Yes
with other states and the IRS

*To verify this information, call the state corporate tax department of Delaware at (302) 577-3300

**Even though this type of information sharing has not been the practice of Nevada in the past, in
today's world the IRS is realistically able to get its hands on any information they deem necessary to further
the cause of “fair and reasonable taxation.”

In short, Delaware’s state corporate tax amounts to 8.7%. Delaware also requires
disclosure of the principal place of doing business outside the state, requires the corporation
to report the actual number and value of its stock, and freely exchanges information with the
IRS.

In addition, Nevada’s corporate legislature has recently surpassed Delaware’s in its
efforts to ensure that the rights of small corporations are protected. Delaware for example,
adopted a statute that allows the corporation to limit the liability of a director for monetary
damages. However, it has far to go to be compared to similar statutes adopted by Nevada.

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For example, the following are acts for which officers and directors would be protected under
Nevada law, but exposed under Delaware Statues:

• Acts or omissions not in good faith.
• Acts by officers are not exempt from monetary damages under Delaware law.
• Breach of a director’s duty of loyalty.
• Transactions involving undisclosed personal benefit to the officer or director.
• Acts or omissions that occurred prior to the date that the statute, which provides
for indemnification of directors, was passed and approved.

Delaware requires that an officer must reasonably believe that he/she is performing
his/her duties in a manner that is in the best interests of the corporation. This is not a
requirement in Nevada.

“The New Kid on the Block” – Wyoming
Wyoming adds a few benefits to home state incorporation, including privacy,
nominees, hiding (but that is not asset protection), lower fees… But ask yourself, does it
make sense to save $200 in fees when you’re protecting $1 million of assets? The bottom
line is protection. If you choose to hide, saving that $200 may just put you out of business.
Like Nevada, Wyoming does not impose a state corporate income tax or other taxes.
And like Nevada, the key is you must have nexus in the state of Wyoming in order to qualify
for the tax savings, otherwise your Wyoming Corporation or LLC will need to register (or
qualify) to do business in the state where you live and operate your business. This will negate
any taxes savings that Wyoming may have to offer. Even an Internet business must
determine where nexus is created in the operation of their business.

"The state of Wyoming does not levy a personal or corporate income tax. Wyoming does
not impose a tax on intangible assets such as bank accounts, stocks, or bonds, either. In addition,
Wyoming does not assess any tax on retirement income earned and received from another state.
Further, there is no legislative plan to implement any of these types of taxes."

Less State Fees
Wyoming initial state fees are less than Nevada's. Wyoming does not require an initial
list of officers or managers, which will save you $125, although Wyoming does not require a
state business license of $200. The key, however, is to evaluate the benefit of Wyoming as
the “pivot point” for your business and financial future, not the fees involved.
One of the biggest mistakes made every day is using as the main criteria for business
decisions, “What do you charge?” Price can be the worst way to evaluate the quality and

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The Insiders Guide To Incorporating And Protecting Your Assets 10 15 09

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