The Nevada Advantage No state provides the advantages of Nevada in developing methods for minimizing your taxes, protecting your privacy or guarding your assets. These advantages arise from exactly the same motivations that have inspired so many tiny countries - developing a way to pay for government services without taxing their own citizens. While Nevada is in no sense "tax free" there are several taxes common in other states that Nevada does not have:

Corporate Income Tax Franchise tax Capital Stock tax Corporate Share Tax Inventory Tax Personal income tax Stock transfer fee/tax Inheritance tax Gift Tax. The Nevada tax advantage combines with an intentionally minimalistic public record and an extremely difficult-to-penetrate corporate veil to give the creative mind a powerful toolkit to achieve both a low (or no) tax burden and a high degree of confidentiality at the same time.

Company Types
Most discussions start at this point with Sole Proprietorships and Partnerships If you wanted to form a company to maximize your exposure to litigation and to minimize your tax advantages, you'd form one of those. That's not why you are visiting this site. We shall concentrate on just three types of companies although we can certainly form any type in any state where it is permitted by law.

Limited Liability Company (LLC)
The Limited Liability Company (LLC) has been devised as a way to allow the formation of a company which allows the direct pass-through of income to the owners without the potential for double taxation. It is well designed for this purpose and has become very popular over the past few years. Advantages include the fact that, unlike an S Corporation, you don't need to be a U.S. Citizen to start it. The LLC has a number of good uses including as a tool to build privacy barriers and as a way of having your company get involved in a joint venture with another company without either taking on a significant amount of liability before the relationship is truly comfortable.

On the downside, the laws governing LLC's vary by state although work is being done on a uniform code for all states to follow. The LLC is also limited to being a private company. If you decide that you want to be listed, you'll have to go through the time and expense to convert to being a Corporation. This is generally neither terribly difficult nor terribly difficult, but is a step that will have to be taken in the process of going public. In addition, if the LLC is owned by a single individual, the IRS can tax it as a corporation. As of this writing you can circumvent this problem by jointly owning the LLC in your personal capacity and through a corporation that you own.

Limited Liability Limited Partnerships (LLLP)
This is a new type of company and is presently available in only a few states. The standard Limited Liability Partnership (LLP) is managed by a General Partner, who is liable for the actions of the partnership, and Limited Partners, who are not. As it has become so common for this limitation to be bypassed by using a corporation as the General Partner a number of states have opted to offer the LLLP. The LLLP works the same as the standard Limited Liability Partnership except that it has the additional benefit of shielding the General Partner as well as the Limited Partners. With the LLLP you have a tool that is useful beyond the common one of estate planning that is a primary use for LLP's.

Corporations
Not the hot fad of the day, but still the best organisation for most persons who are actually engaging in business and not simply using the company as a tax or privacy tool. Nevada's laws permit you to use a nominee to form the company while you retain all of the operating power as an undisclosed Vice President of the company. Double taxation is possible by the IRS, but is generally a minor issue - you can simply pay yourself a salary which is then expensed by the company and is therefore untaxed. There are many other things that you can do for yourself as well, all of which are classified as expenses of the company but which benefit you.

To stay legal and minimize your U.S. taxes you can use an international variant of the upstreaming process that we outline below. There are a number of tax-free jurisdictions in which to form a company and where profits can be held, invested and grown indefinitely.

Nevada's laws are designed to minimize the amount of bookkeeping necessary to keep your company legal. Do that minimum, maintain an arms-length relationship with your company and don't engage in fraud and you'll show far higher profitability and will stay on the right side of the IRS as well.

Upstreaming
The upstreaming concept is simple: show your profits in a low-tax jurisdiction, perform your work in a low-cost jurisdiction and show your expenses in a high-tax jurisdiction. For example - your company was formed in the high-tax/high cost, great climate state of California. Your company manufactures widgets and thing-um-me-bobs for a specialized SUV manufacturer. You've been manufacturing the widgets & thing-um-me-bobs in your own small facility not far from your home. In such a scenario you are giving money to everyone but to yourself and your family. A domestic U.S. plan might look like this:

1. Form a Nevada Corporation (Nevada Admin. Co.) to provide administrative services to your California company.
2. Form a second Nevada Corporation (Nevada Mfg. Co.) to sell widgets and thing-um-me-bobs to your California company
3. Nevada Mfg Co. contracts with an OEM manufacturer in low labour cost Alabama to provide the widgets and thing-um-me-bobs.
4. Nevada Mfg. Co. and Nevada Admin. Services provide products and service to California Corp. and bill at a level that will leave California Corp with little or no profit.

You have now reduced your production costs and virtually eliminated your California Corporation Income Tax. Collectively this can easily be a twenty to thirty percent reduction in costs. Of course, you can reduce your costs even further by moving your companies and manufacturing offshore. By doing that you can dramatically reduce labor costs and also U.S. taxation. Before taking that step you should be extremely careful to cross all your t's and dot all your i's to avoid violating any U.S. laws.

Since you have a couple of Nevada corporations, you can also make your California virtually litigation-proof by having them making substantial loans to the California corporation and filing UCC-1's with the state. Any attorney deciding to sue your California company will find the UCC-1's and will likely conclude that a lawsuit would be a waste of time as the creditors were Senior Creditors and therefore if the company were sued, there would be little or anything for the lawyer to attach to pay his fees. In many cases this will prevent a lawsuit even before it starts.

Asset Protection & Preservation
There are a host of ways you can protect and preserve your personal and business assets. On the personal side a combination of trusts, limited partnerships, non-profit corporations and foundations can function together to protect the family assets in perpetuity.

Onshore/Offshore Plans
What is your net worth? If it is over $50,000 you are in the upper 1/4% of humankind. If it is over $300,000 you are in the upper 1% of all developed nations. And no matter what it is, consider the risk of losing all of it. What would that do to you? Your life's savings, your house, your family, your peace of mind are all at risk. As a practical guide; virtually everyone with a net worth of over $100,000 should take steps to protect their assets. There are many things that can be done, some simple (an umbrella insurance policy to protect against unexpected happenings, for example) Some are complex. Some forms are weak, e.g. Onshore protection. Some forms are strong (e.g. Offshore plans) Of course, any offshore plan must be integrated with your onshore protection plan as well, it cannot live in isolation. What you will need is known in typical legalese is an Integrated Estate Plan with Foreign Situs Trust. We'll call the trust portion of this your "IEPT"

The first question you should ask is whether these plans actually work. The answer is "yes, but..." There are numerous variables that must be considered:

• The facts of your situation;
• Your goals and the way and extent to which they can be incorporated into the IEPT's design;
• The skill with which the IEPT was crafted;
• The nature of the asset(s) transferred to the IEPT;
• The skill with which the IEPT is attacked;
• The skill with which the IEPT is defended;
• The thoroughness and protectiveness of the IEPT's applicable law;
• Whether the opposing party is a governmental instrumentality;
• Whether criminal sanctions would result from the trustees (or others involved) exercising certain options they would otherwise be free to exercise if the litigants were all private parties;
• The law of the forum court; and
• Any biases of the presiding judge.

Don't be scared by this. The reason for estate planning and asset protection is to guard against legal attacks. Clearly, the quality of the documentation, the law in the jurisdiction where you establish your trust, the lawyer defending the trust and the one attacking it are all considerations. We help by ensuring you use jurisdictions with laws that work in your favour and that you are provided with a trust that is crafted to meet your requirements and give you the best possible protection.

Onshore Plans
For those uncomfortable with using an offshore solution as part or all of their Asset Protection Plan there are very solid structures that we can construct within the United States. A typical plan for a family with rental properties and which is "flipping" real estate would involve a Family Limited Partnership to take care of the family's safe assets, A living trust to protect your personal assets, a land trust for each of your rental properties, an S-corporation for handling your active property resales and a Nevada Corporation to shield ownership and eliminate state taxation. While this may sound complicated, we take care of the complexity and provide you with the information you need to navigate through this seeming maze. What you gain is lowered taxes, virtual invulnerability to personal lawsuits and greatly enhanced privacy.

Offshore Plans
If your business is International or has an international component, then offshore structures can be a powerful tool for protecting assets and eliminating tax exposure. Your greatest danger is being seduced by the ease of establishing and operating the offshore structure into violating your local laws. Having said that, however, some advantages that you can obtain by going offshore are:

• Elimination of taxes.
• Dramatic reduction in non-productive paperwork.
• Insulation from the laws of your home country that are different those in the country/countries where you establish your business(es), trust(s) and bank account(s).
• Greatly enhanced privacy, especially if nominees are used.
• Freedom to function globally with minimal restriction.

Trusts
Trusts are an odd sort of entity. They aren't businesses, but they aren't natural people either. They operate in the world in between both where they act like humans but offer the protections of some types of businesses. They are generally formed to avoid estate taxes or to protect from litigation.

Protection from litigation is straightforward - you could place assets that have a high risk of generating lawsuits, e.g. rental properties, into trusts; one trust for each property. When one property was sued for one reason or another, the only recourse of the plaintiff is against the value of the property within the trust. Accordingly, no matter how large the award that was given by a jury, neither the actual owner of the property nor any of the other properties outside the trust would be threatened. All high-risk assets should be encapsulated in trusts.

Protection from estate taxes is equally straightforward. Placing your assets in a trust properly constructed for the purpose will allow you to pass your assets to your children, grandchildren or even great-grandchildren without worrying about estate taxes. There are many creative possibilities as well. For example, the trust can be used to fund high-value insurance policies on your children so that upon their death a great deal of wealth is passed to your grandchildren. Multi-generational trusts can be created which preserve the core of the family's legacy for future generations.

We can provide asset protection specialists, accountants and lawyers who specialize in these areas to ensure that you achieve the results you are seeking without a lot of the costly trial and error that can result from dealing with lawyers who handle one or two trusts a year. Our lawyers do hundreds of trusts each year and will provide the language you need to achieve the results you want at a price that you can afford.