"No Nevada gift taxes means you won't be penalized for your generosity in life," a Secretary of State website advertises.
The state also promises a "corporate veil" that's hard to pierce, fewer rights for dissenting shareholders and a business court system with predictable legal decisions.
Nevada offers more privacy for corporate records than Delaware or California, two other states that are popular for incorporations, and under Nevada law, only shareholders who own at least 15 percent of a company or people authorized in writing by shareholders can inspect and make photocopies of financial records. Delaware typically lets any stockholder inspect and copy data.
Like many other states, Nevada business owners do not have to publicly disclose that they own a company. They don't even have to list their address.
Perhaps most important, though, Nevada offers heightened protection against litigation for corporate officers and directors.
Nevada business executives generally are protected from lawsuits that claim they wrongly extracted personal benefits from a corporate transaction or acted unreasonably on the job. They typically are liable, however, for intentional misconduct and fraud or other violations of the law, said University of Virginia law professor Michal Barzuza, who has studied Nevada extensively.
"We do have greater protection than probably any jurisdiction," Secretary of State Ross Miller said.
The safeguards, while appealing to executives, draw criticism.
"Nevada has all but hung up a 'no law for sale' sign," Barzuza has written.
-- -- --
State lawmakers approved corporate protections in 2001 with the goal of attracting new businesses to Nevada to boost revenue from incorporation filings. They planned to spend $30 million of the projected revenue on salary hikes for public school teachers.
But there were vocal critics. Sen. Terry Care said lawmakers were being asked to protect "corporate crooks." Sen. Bob Coffin said that because of the changes, reputable companies would avoid Nevada and "scoundrels" would move here. Sen. Dina Titus said Nevada should hang up a sign reading, "Sleazeballs and rip-off artists welcome here."
"Nevada has sold its soul, tarnished its already shaken reputation today, in exchange for a $30 million Band-Aid," Titus said at the time.
Nevertheless, she and other opponents ultimately voted for the bill.
Many companies that incorporate in Nevada are far from unsavory. But others lean in that direction.
In September 2011, Reuters published a special report highlighting three men who built thriving businesses helping people set up shell companies in Nevada. Each also served time in federal prison for committing financial felonies.
Aaron S. Young spent 14 months in prison for using Nevada shell companies to help clients avoid taxes, Reuters reported. Wayne Andre McMiniment served three years for wire fraud in a theft and tax-evasion scheme. Richard C. Neiswonger spent 14 months in prison for wire fraud and money laundering.
Nevada often attracts publicly traded companies from states with relatively weak executive protection laws, as well as companies that have a significant likelihood of being forced to restate their reported financial results, Barzuza and Smith said. The companies are led by executives who are willing to take bigger risks, work aggressively to make themselves look good and sometimes play "fast and loose," Smith said.
They like Nevada because they're protected in court against potential liability if their actions create problems. For instance, they are more likely to report revenue as optimistically as possible and to underreport costs in an effort to boost their earnings, Smith said.
"I think there is a concern that some shady companies are taking advantage of this law," Barzuza said.
-- -- --
On the fourth floor of a Henderson office building, one floor above VEGAS INC, it looks like a year-round party at the headquarters of InCorp Services. Streamers hang from the ceiling, balloons hover near cubicles, and walls are decorated with brightly colored murals.
You wouldn't know it walking in, but InCorp is one of the biggest players in Nevada's incorporation business.
"It's not the sexiest of industries, so we try to make the company fun," said Gayle Clauges, formerly known as the director of client services, now called the "empress of first impressions."
Founded in 1998, InCorp employs about 75 workers and has more than 125,000 clients worldwide. In Nevada, more than 31,300 entities list InCorp as their registered agent, state records show.
The company says it is the fourth-largest national registered agent in the country.
Its employees remind clients of due dates for required filings and accept documents on their behalf. InCorp also provides customers with a layer of secrecy and anonymity, as clients can list InCorp's address as their own on publicly available documents.
"No business owner wants to be served with lawsuit papers in front of customers or employees, and you probably don't want to deal with tax and other legal communications in your (everyday) operations," the company's website states. "As your Nevada registered agent, we can handle all of that for you."
The company, which is privately held, does not disclose its financial performance, but Clauges said InCorp regularly hits monthly revenue records.
While InCorp touts its services online, it doesn't mention the perks of incorporating in Nevada.
That's not the case with other registered agents, many of whom are con artists who inflate Nevada's secrecy laws, Miller said.
One registered agent, Corporate Service Center, offers a $100,000 guarantee that the "corporate veil" guarding its Nevada clients will never be lifted.
"You can live anywhere and still incorporate in tax free, lawsuit proof, private Nevada!" the company's website reads.
Founder and President Cort Christie did not return a call for comment.
(c)2013 Las Vegas Sun (Las Vegas, Nev.)
Visit the Las Vegas Sun (Las Vegas, Nev.) at www.lasvegassun.com
Distributed by MCT Information Services
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