| New Nevada Corporate Laws You Need to
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| | criminal investigation. Not for a civil
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| Know
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| | case mind you, but only for a criminal
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| ____________
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| | case.
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| Bearer Shares Outlawed
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| | What this means is that if your business
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| ____________
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| | and asset protection plans are on the up
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| Ownership Disclosure Procedure Instituted
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| | and up, your privacy will be protected.
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| ____________
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| | Or, to put it another way, if you are
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| Stronger Asset Protection for
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| | engaged in fraud and other crimes, our
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| Corporations
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| | firm will be happy to comply with these
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| The Nevada legislature made some
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| | new rules. You may even want to take your
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| significant changes to Nevada's
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| | bad business somewhere else to begin
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| Corporation Code in its most recent
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| | with. But for the good guys, you will
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| session. You need to know these new
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| | still maintain your privacy.
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| rules.
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| | Two points are worthy of further note.
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| The biggest changes, which are effective
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| | First, for limited partnerships the only
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| July 1, 2007, will be discussed in this
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| | owners the new legislation aims for are
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| article. As is often the case, the rules
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| | the general partners. While the generals
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| and regulations used to carry out the new
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| | do indeed control a limited partnership,
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| laws will be implemented over time, and
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| | frequently they only own 2% or less of
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| we will keep you informed of them as they
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| | the entity, and are usually just a
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| arise. (If you or your friends would like
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| | management corporation or LLC. The
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| a free subscription to the Corporate
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| | limited partners will own 98% of the
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| Direct Report please click here.)
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| | limited partnership and, except for
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| For now, there are three important
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| | management, are the economic
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| changes and several miscellaneous new
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| | beneficiaries of the entity.
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| rules you need to know about immediately.
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| | Whether the new law intentionally just
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| 1. Bearer Shares Outlawed
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| | wanted information only on the general
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| Bearer shares are stock certificates
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| | partners or will be corrected to include
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| which, instead of listing the owner by
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| | the limited partners' identities remains
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| name, list the owner only as "The
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| | to be seen. But for now, people very
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| Bearer." The supposed advantage of this
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| | concerned about privacy may want to use
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| was to maintain privacy of ownership. The
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| | Nevada limited partnerships.
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| Bearer was whoever held the certificate,
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| | The second point has to do with Wyoming.
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| so shares could be transferred from one
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| | The corporate law of Wyoming does not
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| person to the next without notice to
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| | have such an ownership disclosure
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| anyone or recordation anywhere.
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| | procedure. Yet.
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| I have never really liked the whole
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| | Apparently the federal authorities are
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| notion of bearer shares. If someone comes
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| | working to get similar legislation
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| to me with the bearer certificate, how do
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| | approved in other states, including
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| I know if the certificate wasn't stolen
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| | Wyoming. We will keep you informed of
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| or forged? The idea of simply handing a
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| | such developments. Until then, once
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| certificate from one person to the next
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| | again, those very concerned about privacy
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| may sound nice and easy (and a bit
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| | may want to use Wyoming entities.
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| crafty) but such a transfer can create
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| | 3. Stronger Asset Protection for Nevada
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| all sorts of tax problems. If you hand a
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| | Corporation Shares
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| certificate representing a million dollar
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| | One of the strongest asset protection
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| business over to your friend you've made
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| | laws on the books is the charging order.
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| a significant gift, for which gift taxes
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| | This law holds that a judgment creditor
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| are due. And when by prearrangement he
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| | of a member of an LLC or a partner of a
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| hands the certificate back to you there's
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| | limited partnership can't acquire those
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| another taxable event. Worse yet, what if
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| | interests directly and use that control
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| your 'friend' wouldn't give you the
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| | to force a sale of the assets. Instead,
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| certificate back?
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| | they only obtain the rights of an
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| The big reason bearer shares were
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| | assignee of the membership or partnership
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| outlawed has to do with fraud. Less than
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| | interest, meaning they are only entitled
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| ethical corporate promoters would sell
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| | to distributions from the entity. They
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| their less than ethical corporate clients
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| | can't vote to sell the assets to satisfy
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| on the idea that by simply handing the
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| | their claim. They can't even vote to
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| bearer certificate over to a friend they
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| | increase distributions. They are stuck
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| could deny a judgment creditor (one with
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| | waiting for future distributions, which
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| a court awarded judgment) access to the
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| | may or may not come. The charging order
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| business or other asset. Of course, such
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| | is a very effective deterrent to
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| a transfer is a fraudulent conveyance,
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| | frivolous litigation, especially in
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| meaning that a court could overturn the
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| | Nevada and Wyoming LLC's and LP's where
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| transfer if anyone ever found out about
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| | the charging order is the exclusive
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| it. The problem was that it could be very
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| | remedy.
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| difficult to find out about it. As a
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| | Up until now, the charging order had
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| result, bearer shares enabled a certain
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| | never applied to shares of corporate
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| class of people to commit fraud. The
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| | stock. So, for example, if John got in a
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| Nevada Legislature was right in outlawing
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| | car wreck and his insurance did not cover
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| bearer shares.
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| | him, the victim could proceed against all
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| 2. New Ownership Disclosure Procedures
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| | of his assets. If John owes 75% of a
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| The use of Nevada corporations and other
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| | profitable corporation the victim could
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| entities to commit fraud is also the
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| | get control of the shares and vote to
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| reason for this next big change. It is
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| | sell the business to satisfy the claim.
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| unfortunate that privacy of entity
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| | This certainly is not fair to Jane, the
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| ownership is now somewhat compromised,
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| | 25% owner of the business, who worked
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| but when people continually abuse the
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| | hard to build it up only to see it sold
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| system something will usually give.
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| | out from under her.
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| Apparently the federal and law
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| | With Nevada's new law the charging order
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| enforcement authorities pushing for these
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| | now applies to shares of corporations.
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| changes played the terrorist card-that
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| | This is an excellent development.
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| insanely bad people were using the
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| | There are several important rules to
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| privacy of Nevada entities to ultimately
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| | point out. The charging order protection
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| greatly harm us. While it is my opinion
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| | only applies to corporations that have
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| that this red hot card gets played a
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| | more than one and fewer than 75
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| little too often these days, there can be
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| | shareholders. If you own 100% of a
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| no denying that domestic bad guys, your
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| | profitable corporation you may well want
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| average American scam artist, used Nevada
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| | to consider issuing a nominal amount of
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| privacy for nefarious purposes.
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| | shares to a relative or friend in order
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| But the new law for corporations, LLC's,
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| | to gain the better protection. As well,
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| LP's, business trusts and the like is not
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| | the new law does not apply to
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| as bad as you may expect. Here is the
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| | subsidiaries of publically traded
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| rule for corporations:
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| | companies or to professional
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| 1. In addition to any records required to
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| | corporations.
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| be kept at the registered office pursuant
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| | The charging order protection for
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| to NRS 78.105, a corporation that is not
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| | corporate shares does not apply to any
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| a publicly traded corporation shall
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| | litigation filed before July 1, 2007, and
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| maintain at its registered office or
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| | it does not supersede any private
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| principal place of business in this
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| | agreement between a stockholder and a
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| State:a. A current list of its owners of
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| | creditor. This new law puts Nevada at the
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| record; orb. A statement indicating where
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| | forefront of asset protection states.
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| such a list is maintained.
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| | While Wyoming will most probably follow
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| 2. The corporation shall:a. Provide the
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| | suit, until they do Nevada is the state
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| Secretary of State with the name and
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| | in which to incorporate. Even though
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| contact information of the custodian of
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| | Nevada's initial and annual filing fees
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| the list described in subsection 1. The
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| | are somewhat higher than Wyoming's fees,
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| information required pursuant to this
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| | the better protection is well worth the
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| paragraph shall be kept confidential by
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| | extra cost.
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| the Secretary of State.b. Provide written
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| | 4. Miscellaneous New Rules
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| notice to the Secretary of State within
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| | The new law dealt extensively with the
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| 10 days after any change in the
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| | conduct of restricted agents. A new
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| information contained in the list
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| | category was created that of the
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| described in subsection 1.
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| | commercial registered agent, which shall
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| 3. Upon the request of any law
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| | be registered with state. Registered
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| enforcement agency in the course of a
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| | agents that don't comply with rules to be
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| criminal investigation, the Secretary of
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| | established by the Secretary of State's
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| State may require a corporation to:a.
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| | office can be banned from the business.
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| Submit to the Secretary of State, within
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| | In keeping with the new disclosure rules,
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| 3 business days, a copy of the list
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| | registered agents must keep a company's
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| required to be maintained pursuant to
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| | stock ledger for three years following
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| subsection 1; orb. Answer any
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| | the registration or termination of the
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| interrogatory submitted by the Secretary
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| | agent or dissolution of the company.
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| of State that will assist in the criminal
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| | The new law allows for professional LLCs.
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| investigation.
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| | Many doctors, lawyers, CPAs and the like
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| 4. If a corporation fails to comply with
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| | have wanted the flexibility of operating
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| any requirement pursuant to subsection 3,
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| | their practices as an LLC but were
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| the Secretary of State may take any
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| | prohibited from doing so. The new law
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| action necessary, including, without
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| | follows the trend of many states of now
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| limitation, the suspension or revocation
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| | allowing for professional LLCs.
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| of the corporate charter
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| | The importance of the corporate election
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| 5. The Secretary of State shall not
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| | of directors was underscored in the new
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| reinstate or revive a charter that was
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| | law. Companies that fail to elect
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| revoked or suspended pursuant to
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| | directors within 18 months beware. The
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| subsection 4 unless:a. The corporation
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| | owners of 15% of the corporate stock can
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| complies with the requirements of
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| | go to court to force such an election.
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| subsection 3; orb. The law enforcement
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| | The reinstatement of entities was made
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| agency conducting the investigation
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| | more effective. A corporation, LLC or LP
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| advises the Secretary of State to
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| | that fails to pay its annual fees to the
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| reinstate or revive the corporate
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| | state can lose its right to do business.
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| charter.
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| | Reinstatement involves paying back fees
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| 6. The Secretary of State may adopt
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| | to bring the entity current with the
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| regulations to administer the provisions
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| | state. The new law provides that
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| of this section.
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| | reinstatement reinstates the entity's
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| It is important to note that Nevada is
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| | right to do business as if the entity had
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| not asking for the owners of the entity
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| | been current all along.
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| up front. The requirement is that the
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| | As we have noticed before, the law is a
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| registered agent either keeps a list of
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| | dynamic and ever changing area. Nevada's
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| the owners or the name of a contact
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| | new laws prove the point. Once again, if
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| person who has a list of the owners. The
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| | you or a friend would like to receive
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| Secretary of State will request the
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| | updates on changes to the corporate laws,
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| ownership list only when a law
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| | please click here.
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| enforcement agency needs it for a
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