September 26, 2007

Webinar“The Pitfalls and Truth about Nevada Corporations”

S. James Park, J.D., LL.M.

“Corporate Credit- Fact or Fiction

Is it a Possibility for my business?”Mathew N. Sorensen, J.D.

www.kkolawyers.com856 South Sage Dr., Suite 300, Cedar City, Utah

Telephone 435.586.9366 / Facsimile 435.586.9491

© Kyler Kohler & Ostermiller, LLP 2007

Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler & Ostermiller, LLP is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs.

Instructor Notes

© Kyler Kohler & Ostermiller, LLP 2007

To Preserve Privacy

Why do most people incorporate in Nevada?

To Protect Assets

To Avoid Taxes

The Half-Truths

To Preserve Privacy

What is Advertised:

To Protect Assets

&

The Half-Truths

To Preserve Privacy

What is Advertised:

To Protect Assets

&

The Rest of the Story

To Preserve Privacy

To Protect Assets

&

1. True, in Nevada, only the names and addresses of the Registered Agent, the first Board of Directors and the Incorporator(s) must be disclosed, along with the corporate officers – who can be the same person. (The use of a proxy or nominee may be used – but at a cost and with no guarantees.)a. The owners usually lose this privacy if the company: is

registered in another state (doing business), issues stock, obtains a Nevada business license, opens a bank account, has an employee or contractor (which it must), enters into any contract or agreement, or obtains a loan from a bank.

2. A Corporation is an asset protection tool WHEREVER you incorporate! The main purpose of its existence is to isolate the personal assets of an owner from that of a properly run corporation. a. The concept of the Corporate Veil is key to any business entity.b. It DOES matter, however, what type of assets are placed in a

corporate structure. There may be disastrous tax implications.

The Rest of the Story

3. Despite what is advertised out there, Nevada corporate stock is NOT exempt from outside Creditors who obtain a judgment against the owner personally (Auto Accident = Law Suit. Law suit + Bearer shares = big trouble if you lie as to ownership.) a. NOTE: A study of case law does reflect that the

Nevada corporate veil is one of the hardest to penetrate. 4. It is true in Nevada that there is no information sharing with

the IRS.

To Preserve Privacy

To Protect Assets

&

The Half-Truth

To Avoid Taxes

What is Advertised:

The Rest of the Story

To Avoid Taxes

1. There is no Corporate Income Tax in Nevada (Only if you are a company doing business* in Nevada. If you are a Nevada company doing business in California or any other state, you will generally be subject to that state’s income taxes.)a. Excise payroll tax imposed on each employer at a rate of 0.63

of wages must be paid by employer quarterly. 2. There is no Nevada Franchise Tax (If you are a Nevada company

doing business in California or any other state, you will generally be subject to that state’s Franchise Tax.)

3. There are no Stock Transfer taxes on Corporate Shares. 4. There is no Minimum Capitalization requirement in Nevada.5. There is no IRS information sharing.6. Corporate federal tax payable is only 15% on the first $50,000 of

net income ANYWHERE!

* ‘Doing Business’ is a term of art and is defined differently in each state, but the underlying theme is the same. See the Miscellaneous slide

for what is NOT ‘doing business’ in Nevada.

The Rest of the Story

7. There is no Personal Income Tax in Nevada (Only if you are a resident of Nevada. Example 1: Joe is a Nevada resident (his home and family is there) but he commutes to Cedar City to work M-F each week. Joe will pay Utah income taxes on 100% of the money earned in Utah. Example 2: Joe lives in Utah but works exclusively in Nevada. Joe will pay Utah income taxes as a resident of Utah. = There are no Income Tax Breaks if you are not living and working in Nevada.

To Avoid Taxes

Miscellaneous

Doing Business: In NEVADA ‘Doing Business’ does not include: maintaining or defending any legal proceeding, holding board or shareholder meetings, maintaining bank accounts in banks or credit unions, maintaining offices for transfer, exchange and registration or corporations own securities, making sales through independent contractors, soliciting orders outside state and accepting them outside of state and shipping goods into state, creating or acquiring indebtedness, mortgages and security interstate in real or personal property, securing or collecting debts or enforcing mortgages and security interests in property securing debts, owning real or personal property, isolated transaction not completed within 30 days, production of motion pictures, transacting business as out of state depository institution.

CONCLUSION

The most common reasons for incorporation – INCREASED PRIVACY, INCREASED ASSET PROTECTION and LOWER TAXES AND FEES – are not as advantageous as some promoters taut them to be for most people .

Notwithstanding the above, Nevada certainly provides several protections for corporations, such as a higher standard for officer wrong-doing (much more than mere negligence as found in many states); increased liability protection for high-risk business activities; the appearance of an impenetrable shield; and ofcourse you generally will get the full package of promoted benefits if you are located in and do business in the great state of Nevada.

“Corporate Credit-

Fact or Fiction

Is it a Possibility for my business?”

Mathew N. Sorensen, J.D.

Why Corporate Credit?

- Bad Personal Credit

- Need more Credit

- Multiple Owners

- Separates Personal and Business credit

NOT TO GET AWAY FROM PAYING!!

Corporate Credit Myths

- Shelf Corporation

- Easy to Obtain

- Need a C-Corporation

- Able to buy Personal use assets under the business name

Corporate Credit Facts

- Corporate Credit Takes Significant Time to Earn.

- Must have an actual business.

- A business entity is required.

Corporate Credit Basics and Resources

Major reporting agencies are:

- Dun & Bradstreet.(www.dnb.com) - Experian Business Credit Services.

www.businesscreditfacts.com

- A business entity is required.

- Must have vendors that report payment history under company.

For more information, please contact us at:

KYLER, KOHLER & OSTERMILLER, LLP856 South Sage Dr., Suite 300

Cedar City, Utah 84720Tel: 435.586.9366 Fax: 435.586.9491

www.kkolawyers.com