Industry Interviews
Mainstream Services
Sites We Like
Speaking Engagements
Tax Review
Types of Sites
Webmaster Resources
Question Regarding The Article: Using Corporations To Hide Publicity-Shy Investors

Q: Why not just make it a Nevada corporation? Aren't the shareholders private there?Eric J. White


An excellent question! It is true that shareholders are not publicly listed in Nevada. That is only part of the analysis, however.

If you are living in Nevada or the corporation is actually doing business there [not just renting an address], forming a single Nevada corporation is fine. Most people, however, live in another state and do not wish to move to Nevada.

If the business owner is living in another state, they run into serious tax problems in their own state if they use a single Nevada corporation. Each state has a set of laws that dictate that if a Corporation is conducting its day-to-day business in the state, it must be registered in the state. One option for using a Nevada Corporation is simply to have the Nevada corporation file as a "foreign corporation" in the state in question, for example Texas. The problem, however, is that most states make shareholder information for corporations available to the public. This obviously defeats the initial goal of protecting the identity of the shareholders as the foreign corporation filing lists the shareholders. As such, it is better to form a second management corporation to create space between the adult entity and the investor.

In short, you cannot live in Texas, design the site, run the site, shoot content, maintain a bank account, sign contracts, market, etc., and just call yourself a Nevada corporation. For all intensive purposes, you are a Texas company.

The state tax agencies have become aggressive in investigating these situations. A number of states have extreme penalties for undertaking such a strategy. In California, the fines have been up to $10,000 a day for failing to register with the Secretary of State.

A Nevada corporation is a valuable tool to use as part of your business protection strategy. Unfortunately, many people fail to use the proper strategy and end up shooting themselves in the foot. Instead of creating security, they open themselves up to legal and tax problems.

J.D. Obenberger

Any offers contained herein to provide legal services are void where prohibited by law. AdultInternetLaw cannot represent clients generated through this Web site from states or countries where the material and information contained herein does not comply with local ethics rules. AdultInternetLaw has endeavored to comply with all known legal and ethical requirements in compiling this Web site. In the event that any material on or communication from this Web site does not conform with the laws or regulations of any state or country in which it may be received, AdultInternetLaw will not accept legal representation based on this material or communication from a person in such a state or country. Further, this Web site is for informational purposes only and your use of this site is not intended to and does not create an attorney-client relationship, does not constitute legal advice, and is not a substitute for legal advice from qualified legal counsel. Information on this Web site is provided “as is” without warranty of any kind, and AdultInternetLaw cannot be held liable or responsible for any consequences, seen or unforeseen, arising out of your use of this Web site and the material contained herein. Any links provided on this Web site to other Web sites are not endorsements of the linked sites, and AdultInternetLaw is not responsible for your use of any linked Web sites.

© 2002 AdultInternetLaw.com. All rights reserved.