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Nevada Incorporation - Advantages of Forming a Corporation in Nevada

Aug 17, 2007
Incorporating in Nevada 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, Nevada incorporation usually provide an increased tax shelter for qualified pension 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 requires 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.

Nevada Incorporation - An Enduring Structure

A Nevada 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. Below are a few other reasons for Nevada incorporation: 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.

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.

Marketing Advantage of Incorporating
This is perhaps the biggest overlooked advantage of them all! We live and do business in a competitive world. You already know that 95% of businesses fail in the first five years. When starting off in a new business, the first impression you make on new prospects is critical. One mistake could cost you your entire business. In fact, many great "could have been" businesses were only three to five new customers short of reaching the next level of success.

What message do you send as a sole proprietor?

First, let's get a marketing perspective on sole proprietorships and the image that they project. The typical CPA recommends that if you don't have over $40,000 in net profit, incorporating in Nevada may not make sense for you and may not reduce your taxes. That's no secret.

Knowing this, what message are you sending when your business card bills you as "Owner/Operator"? New prospects know that you didn't incorporate, and they probably assume that they know the reason why - that you probably don't earn $40,000 in profits, and your CPA recommended for tax reasons that you remain a sole proprietorship. Worse, you didn't believe in yourself enough to invest the money to incorporate.

Are those the messages you want to convey when trying to attract new business?

For Nevada Incorporation, you send a very different message : "This is John Smith, CEO of ABC, Inc." That "foot in the door" strategy is far superior to "This is John Smith, Owner/Operator of ABC."

Bottom line? From a purely marketing point of view, incorporating in Nevada makes sense 100%.
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Learn the advantages of Nevada Incorporations or forming an LLC.
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