I heard that a Nevada LLC is better than a “Home State” LLC, why?

Nevada has specifically crafted its laws to attract small to mid-sized businesses to incorporate in Nevada. The easiest way to pierce the corporate veil is what’s called the “Alter Ego Theory” where they say, “Your Honor, this LLC is dominated and controlled by Adam in such a way that there is no legal separation between him and the LLC. He owns the LLC, he controls the LLC, he is the LLC. Now, this thing is nothing more than a sham that is set up to shield him from liability.” Unfortunately, the courts have taken a stance that if it is set up as a sham and it’s not operating properly then they will ignore the fact that you have a corporation or LLC and allow those people to sue you personally. So, it’s really important that you look at these variables and understand that it's totally up to the courts to decide whether or not you should be held personally liable. Well, the beauty of having a Nevada LLC is that by statute Nevada law says the only way to pierce the corporate veil is if someone can prove that you are intentionally committing fraud. It is a statutory law, in writing, not based on case law like most other states out there so it really gives you the very best protection and the strongest corporate veil separating you from your business. The rules are that wherever you incorporate, those are the laws that protect you regardless of where you’re operating. So, if I was setting up a business for someone who is in North Carolina, I would organize the LLC under the laws of Nevada and then register appropriately with North Carolina. It’s called foreign filing, where we send in a document to your home Secretary of State and tell them, this is a Nevada LLC organized and protected under the laws of Nevada and we’ll be doing business in North Carolina.

The second reason that I love Nevada, is that Nevada picked up a law called Charging Order Protection, by statute, that unlike other states protects single-member corporations and single-member LLCs. That is really the holy grail of asset protection. If someone sues your company and wins, the courts don’t allow the veil to be pierced, the court will foreclose on whatever cash or assets you have in the business only (judicial foreclosure). However, with a Nevada LLC, there is no judicial foreclosure. Nevada law states that you will receive charging order protection by statute, meaning someone can sue your company and win but they cannot foreclose on cash or assets that are owned by the business to satisfy a judgment. The best they can do is get a judgment against your company and then they’re stuck hoping that you someday distribute a profit because that is the only way that they get paid. So you literally become the worst nightmare of these contingency attorneys, because if they’re not getting paid, they’re not taking the case. That’s a really huge important part of the law that was passed in 2011 that provides the Charging Order Protection for single-member corporations and LLCs. It further clarifies that “Alter Ego” claims cannot be made against a Nevada LLC. It puts you in a great position where the easiest way to pierce the veil is the “Alter Ego” claim and they can’t even make those claims in court against a Nevada LLC. It’s a great protection.

The last reason I like Nevada is that Nevada provides reverse piercing protection. So if you were to get sued personally and they bring you into a deposition for everything you own, your house, your cars, you're a beneficiary of a trust - they want to know everything. Failing to disclose this information is a felony so of course, you want to tell them all the stuff you own and you own your LLC which becomes an attachable asset just like your house, your car, or anything else. Well, under Nevada law, they can sue you and they can win but they cannot touch the Nevada LLC to satisfy any of your personal debts and obligations. It protects the business from you. So we have outside-in liability and inside-out liability. Nevada covers you all the way around so you have the very best protection no matter what. That’s why we use Nevada versus your home state. It gives you the best protection.

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