Step One—Nominee Service
The initial list of officers for the corproation must be filed with the Secretary of State by the first day of the month following the month of incorporation. Assuming that privacy is the goal, you will probably want to use nominee service, whereby the nominee is listed as all of the corporation’s officers and directors. (In Nevada, one person may be all of a corporation’s officers and its director.) This decision, as with all decisions made by you as “caretaker” of the corporation, should be documented with a corporate resolution, signed by yourself as the corporation’s REAL director.
With the filing of the initial list of officers using a nominee to represent the corporation on the only NRS-mandated public record, you now have control of the corporation but nobody can discern that fact based upon any outside observation. So far, so good.
Click here or on the navigational button above to proceed to Step Two.
Step Two—Appointment of Officers
The next step might be to establish who the REAL corporate officers are. Acting as Director, you may appoint anyone you wish to various positions—including yourself, since Nevada allows one person to occupy all positions. You could also appoint yourself to the position of Vice President, as long as the Bylaws empower the Vice President to act in the absence of the President.
Taking these appointments a step further: As long as the Bylaws authorize such officers (and if they don’t you might want to adopt Bylaws that do), you could appoint your resident agent as, say, Assistant Secretary. This would allow the resident agent to sign the annual list of officers, attest to the corporate Bylaws or even to certify minutes of meetings, for instance. You could appoint someone to act as Assistant Treasurer, allowing them to have signing authority over the corporation’s bank account. Some resident agents offer to handle such things for various fees, generally relating to perceptions of potential liability. If you would find such services valuable in implementing privacy—ask. Remember, none of these officers need to be listed with the Secretary of State!
At this point, you now have formalized control over the corporation WITHIN its corporate records but nobody on the OUTSIDE has any way of knowing how the corporation is really structured.All they can know, until you tell them differently, is whatever is a matter of public record. And the public record shows only the name and signature of the NOMINEE.
Step Three—The “Tricky” Part—Ownership
Now, who is going to OWN the corporation—to whom will stock be issued? The best answer to this question depends on a number of factors but note that no matter what decision is made at this point, the records of stock ownership are completely internal to the corporation and unavailable to any casually-inquiring non-stockholder. In really serious attempts to penetrate the corporation’s privacy, by the time a Court Order would compel production of the corporation’s records you should be able to have everything in order, “according to Hoyle”.
If the corporation will be subject to IRS designations such as “Personal Service Corporation”, “Personal Holding Company” or “controlled group” status—then it might be wise to issue stock to at least 6 separate shareholders, because the definition of each of those applies to situations where there are 5 or fewer shareholders.
These stockholders do not even need to be named within the stock ledger—you could just make the certificates out to “bearer”! And where the stock ledger indicates the “consideration” for which the shares were issued (typically stated as “amount paid thereon”), you might put, “for services rendered”. You might recall that Nevada’s corporate statutes allow for stock to be issued in exchanged for services AND that the Board of Directors may determine what value is ascribed to such services.
Since control of the corporation rests ultimately, by law, with the corporation’s stockholders, you might want to make out the certificates for the nominal amount of 100 shares each. At this point, if the corporation has the typical 25,000 shares authorized (specified in the Articles of Incorporation), you have issued just 2.4% of the authorized stock but it represents “potentially” 100% of the corporation’s ownership. Any actual or prospective “bearer” of such stock might enter into a side agreement with you, allowing you (or the corporation) the right to repurchase the stock for a nominal fee at any time, along with an understanding that you will have an irrevocable proxy to vote the stock.
Let’s see what would happen if the side agreements failed to do their job, if they somehow got “lost and forgotten”: Any formal attempt to take over the corporation on the part of the stockholders would have to be done at a stockholders’ meeting, of which the corporation itself must be notified, along with the stated purpose of the meeting. (This is a standard provision in a corporation’s Bylaws. If it is not in your Bylaws—put it there. If you don’t know how to accomplish this properly, please contact us.)
Assuming that your Articles of Incorporation specify the standard amount of stock, they authorize the issuance of 25,000 shares. With 25,000 authorized and 600 shares issued, any such maneuver by your new-found enemies could be forestalled by the issuance of 601 shares to someone more “friendly”! Or, better still, issue all of the remaining shares—diluting the outstanding shares substantially—leaving the former-friends-turned-hostile with exactly 2.4% interest in the company. And if that’s too much for your liking?
The Board of Directors (YOU) may amend the Articles of Incorporation and increase the number of authorized shares to, say, one million—leaving the traitors with six-one hundredths of 1% of the value of the corporation; a veritable “mouthful of dirt”. (Again, if you need help with amending the corporation’s Articles, please contact us.)
Please bear in mind that there is no liability whatsoever attached to ownership of stock! So it should be easy to find some friends who might be willing to do this for you—especially if you would do the same for them. On the other hand, if you find a lack of friends willing to participate, you could always ask us about our “nominee stockholding” arrangement. CORPORATIONS CAN OWN STOCK, TOO, AND WE JUST HAPPEN TO BE ASSOCIATED WITH HUNDREDS OF CORPORATIONS, MANY OF WHICH MIGHT SHARE YOUR CONCERNS ABOUT AND INTEREST IN MAINTAINING PRIVACY.
Step Four—The Really Tricky Part—Control Without Ownership
Looking, as we have been, from the INSIDE of things, is there any doubt who is in CONTROL of the corporation? From the OUTSIDE, of course, it’s a completely different matter. All that anyone on the outside can see is whatever is a matter of public record—the list of officers filed with the Secretary of State, which shows only a nominee. Anyone on the outside cannot know anything at all about ownership unless you tell them.
“But,” it might be argued, “the corporation has to FUNCTION! What happens when you go to open a bank account or apply for a business license, or do any number of other things that require the signature of a corporate officer or disclosure of the corporation’s principals?” Yes, this can get a little tricky in some cases. Let’s look at two of the most awkward situations and see if there are some solutions to the perceived problems.
Business Licensing
The application for a business license in Las Vegas entails filling out the form, “Nevada Business Registration” as well as the “City of Las Vegas Supplement”. Section 10 of the Nevada Business Registration asks for the “Names of owner(s), Partners, Corporate Officers, Etc.” and provides spaces for name, title, percent owned, residence address, residence phone, SS# and date of birth. “If Individual Ownership,” the form declares, “list only one Owner.” Hmmm—sticky wicket! Or so it seems, on the face of things.
What happens if you don’t have a business license? Do you really need a business license? What might ever trigger an inspection of your business to determine if it is licensed? How many of the over 300,000 corporations registered in the State of Nevada have or do not have business licenses? Why is there such a thing as business licensing? Let’s obtain the answer to the last question, directly from the City of Las Vegas web-site regarding licensing:
“Why does the City license businesses? Businesses are licensed to insure that their location is properly zoned for the activity to be conducted, that the building the business will be operating in meets fire safety code standards, that all state and local codes are adhered to insuring the safety and well-being of our citizens, and that privilege businesses are properly regulated.”
If the activity of the business requires a physical presence in the form of office space not otherwise licensed (say, as in the case of a “virtual office”), then issues of zoning, fire safety and the safety of Nevada’s citizens are involved. Otherwise, how is there ever going to be any connection to these stated reasons for requiring licensing? (This is very reminiscent of NRS 78.105, which requires that a corporation maintain certain records at its registered office—for inspection by the stockholders. If inspection by the stockholders is not an issue—why maintain such records?)
Let’s say that you are occupying physical space in the conduct of your business and you DO require a business license. What then? Remember that section 10 of the Nevada Business Registration form adds, “If Individual Ownership, list only one Owner.” What if the owner of ABC happened to be a corporation named XYZ? It seems it would be entirely possible to submit that ABC’s individual owner is XYZ. XYZ could provide its Employer Identification Number in the space where “SSN” would otherwise be required.
Keep in mind that ownership of a corporation can be a very transitory thing. It might be one thing at the moment the Nevada Business Registration form is signed and it might be something else altogether just a few hours later.
As for signing the application, perhaps a minor officer of the corporation, a vice president or an assistant secretary could do that. Certainly, one would hardly expect the CEOs of IBM or Exxon to be involved with such an application on behalf of their corporations!
All that is necessary to maintain corporate privacy in most cases is a little careful THOUGHT. Think it through and you will find your answers. And if you need a little help, give us a call and maybe we can find a solution for your particular situation by thinking it through together.
Banking
Many people seem to think that setting up a corporate bank account eliminates the possibility of maintaining corporate privacy. This is not true. Signing authority over a corporation’s bank account does not constitute either ownership or control of the corporation. It is true that the authorized signer(s) are linked to the corporation—but linked in what way?
Most banks require a corporate resolution authorizing the signer to open and maintain the bank account. The signer, however, is not required to be an owner or Director. In fact, many banks in Nevada will accept a corporate resolution “signed” (often with a facsimile signature) by a known nominee, leaving the real Director(s) out of the picture altogether.
Thus, all the banking resolution reveals is the identity of the authorized signer, who may be a “secondary” officer of the corporation—a vice president or an assistant treasurer. This person could be the corporate bookkeeper—or just someone authorized to sign checks. From the corporation’s perspective, this party must be trustworthy but need not know anything much about the corporation’s activities. They might sign so many checks that they use a signature stamp to make quick work of it.
For corporations, there is absolutely nothing unusual about the use of a facsimile of a signature on company checks. Whether electronically embedded in the laser printing of checks or affixed with a rubber stamp, the bank does not generally question those signatures! If you do not know someone who would allow you to stamp their signature on the company’s checks like this, contact us and we can discuss nominee check signing, for a nominal fee.
Many banks offer corporate “debit” cards, which are in both appearance and day-to-day usage, very similar to credit cards. Such a card can be used to book airline hotel reservations, or to obtain cash from ATMs. The use of such a card automatically debits the corporate checking account, so there are no credit-card-type fees. Where arrangements have been made for nominee check signing, it may be possible to have such a corporate debit card issued in the name of the nominee signer—but usable in many ways by the corporation’s other officers. Please understand that such a card is probably NOT usable for direct, face-to-face payments at retail stores, where identification for the individual named on the card will often be demanded.
Other Situations
In most cases, the signature of a corporate vice president will prove sufficient to satisfy the curiosity of the outside world. A corporation may, of course, have any number of vice presidents, whose term of office might last for anywhere from a few hours to indefinitely. If you need help thinking through the specifics of a troublesome situation, please contact us.
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