Two Corporation Strategy

There are two major reasons why someone from another state would establish a Nevada corporation:

  • To reduce your home state taxes.
  • To protect your assets.

We are sure you will agree that the best way to assure that you are judgment-proof is to appear to be poverty-stricken and destitute. Even if you are sued and a judgment is obtained against you, you have nothing to lose.

Although none of us want to be poverty-stricken, we can arrange our affairs to appear so. One of the best asset protection strategies you have is to be dirt poor. Do not own anything. (At least make it appear that you do not own anything.) You then will be free from encumbrance.

Our best strategy for accomplishing this is to have two companies doing business together. For example, we have clients who have their business in the home state which can be a corporation filed in that state or a sole proprietorship. In addition, they have a Nevada corporation, which is used to protect their assets by filing a lien on any real or personal property. (Either a mortgage or deed of trust on real property and a UCC-1 filing on personal property.) If someone sues you (personally) or the home state company, they will be unable to collect because of the previous lien that was placed on your assets.

In Nevada, you do not have to reveal the stockholders of a corporation. The only thing revealed is the identity of the officers. If you have nominee officers for your corporation, your name is not revealed. You, therefore, have privacy. No one knows who owns your corporation. If done properly, this can be a very valuable strategy for protecting assets.

Another way to accomplish the same thing is to have your home state corporation lease the property, equipment, etc., from the Nevada Corporation that files the lease in your home state showing it as the owner of record. You can have nominee officers for this corporation, therefore assuring your privacy.



The above illustration shows how to protect assets. You can also use multiple corporations to reduce taxes in your home state. The Nevada Corporation would enter into contracts to do business with your home state corporation. For example, you may pay a bookkeeper $10,000 per year to keep your books. Let’s transfer that responsibility to the Nevada Corporation and increase the amount paid to the Nevada Corporation to $14,000. You still pay the bookkeeper as an independent contractor the same $10,000. Your Nevada Corporation now has a $4,000 profit, which is not taxed in Nevada, and your home state corporation has an additional $4,000 deduction on your home state income tax. Let your imagination go to see what other kinds of legal activities you can transfer to Nevada and reduce your home state taxes. Nevada does not have a personal or corporate income tax! Any bill you pay to your Nevada Corporation will be tax-deductible in your home state, and there will be no Nevada state taxes.

You can pay many bills through your Nevada Corporation. Mark up the bills by 25% to 30% to your home state corporation, take the deduction in your home state, and give your Nevada Corporation the profit while at the same time reducing the profit in your home state. This legal strategy is called “up streaming”. We help you open a Nevada bank account through which you can pay these bills.

You can enter into contracts with your Nevada Corporation for any legitimate business purpose, such as consulting services, thus transferring income into Nevada where it will not be taxed by the State of Nevada. There may also be many products that the Nevada Corporation can supply to your home state corporation. Think of the possibilities.

It is extremely important that every transaction has a paper trail. Make sure that your Nevada Corporation has contracts, invoices, and other records to document the business transactions just like any other supplier or professional.