A Nevada corporation is any company that is legally chartered or registered in the state of Nevada in the United States. Chartering an organization in this particular state generally provides several business friendly legal and tax advantages that seeking a charter in every other state, except for Delaware, cannot. A corporation does not have to be physically based in Nevada in order to charter there, so few Nevada corporations are actually headquartered in the state. Companies cannot enjoy the various benefits of this legal loophole, however, unless they follow certain guidelines.
Providing corporate legal incentives is not unique to Nevada, because Delaware also provides similar inducements for chartering there. This type of business is called a Delaware corporation. In both cases, certain tax and legal benefits are provided to companies that are unavailable in other states. The level of protection and benefits offered in Nevada, however, are generally believed to be more robust than in Delaware.
The main advantage to forming a Nevada corporation is that, no matter where the company is actually headquartered, it is subject to Nevada law if it is taken to court. Many companies prefer to charter in Nevada because, in many instances, state laws protect corporations more than other state laws. Two examples are that Nevada law offers more flexibility to a company's board of directors and better protects against a hostile corporate takeover. Nevada also provides strong protection against "piercing the corporate veil," which means that corporate officers as individuals are less likely to be held responsible for legal wrongdoing.
Taxwise, the state of Nevada also offers a great deal of benefits to a company that is chartered there. A Nevada corporation is not subject to paying a franchise tax when chartering in the state, which can save massive amounts of money. Also, Nevada imposes no corporate income tax or personal income tax, a fact that saves corporations and the individuals in the corporation millions of U.S. dollars each year.
The benefits for setting up a Nevada corporation can be very tempting to companies. In order to take full advantage, several guidelines must be met; failure to do so can result in financial and legal woes for a corporation. For example, to utilize the full array of legal and tax benefits, a company must issue stock, have employees, and obtain a business license. Failure to meet these requirements and many others may open the corporation in question to audits from the tax authorities in the state the company operates in because Nevada law can no longer protect it.