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VEGAS INC C OV E R STO RY Nevada businesses pay minimal taxes, receive greater legal protections incorporating, From page 1 Nevada, in return, reaps a large amount of money – and controversy – from the setup. Plenty of legitimate businesses incorporate in the state. Many file in Nevada because they can pay minimal taxes and are more protected from shareholder lawsuits than in other states. Money saved, in theory, can be reinvested in operations and used to grow their businesses. But Nevada also is home to a large number of out-of-state companies that fudge their accounting and use seemingly fraudulent business tactics, hurting the state's reputation as a place for legitimate enterprise. And while increased fees and the recession have caused new business filings to taper off, Carson City still collects large pots of money from the incorporation industry. Commercial recordings have pumped more than $100 million a year into the state's coffers since 2010, thanks in large part to the doubling of Nevada's annual business-license fee. It rose from $100 to $200 in 2009. Last year, Nevada earned $133 million in revenue from corporate filings, up 3 percent from the year before, according to Las Vegas research firm Applied Analysis. New entity filings were down 5 percent, slipping to 55,565. Statewide, more than 287,000 entities are in good standing with regulators, according to Applied Analysis, which analyzes data for the Nevada Secretary of State. That's one company for every 10 Nevadans. Despite the slowdown in filings, Nevada's commercial recording business remains strong. Applied Analysis principal Jeremy Aguero said filings generate about the same revenue as the state's live entertainment tax. About 50,000 new entities were incorporated annually in Nevada from 2000 to 2003, and new filings peaked at about 85,000 in 2006 during the height of the economic boom. Since 2009, after the recession hit, they have hovered in the 55,000 to 60,000 range. 14 20130722_VI01_F.indd 14 LEILA NAVIDI AGENT OF RECORD: Gayle Clauges works at InCorp Services in Henderson. The company serves as a registered agent for more than 31,300 business entities worldwide. Many of the companies are brickand-mortar businesses with offices, staff and day-to-day operations. Others are shell corporations that exist solely to hold real estate or other assets for owners. Many are not based in Nevada. About 250 publicly traded companies were incorporated in Nevada as of 2011, but only 10 to 20 percent of them physically are headquartered here, said David Smith, a University of Virginia commerce professor. ••• State officials make it clear why they want companies to incorporate in Nevada. On state websites, officials highlight a laundry list of taxes business owners can avoid by incorporating here — corporate income taxes, personal income taxes, franchise taxes, estate taxes, inheritance taxes and more. "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 | 2 2 J U LY 2 0 1 3 | 7/18/13 2:04:39 PM