In Which State Should You Form Your New Entity?

Nevada Corporation Code allows for the indemnification of all officers, directors, employees, stockholders, or agents of a corporation for all actions taken on behalf of the corporation that they had reasonable cause to believe were legal. This indemnification includes any and all civil, criminal and administrative action. (See NRS 78.751.) These two laws provide complete protection for the officers and directors of Nevada corporations, as long as they act prudently in their roles.

The other significant change in Nevada law is the abolishment of joint and several liability. Joint and several liability means that should a judgment be entered against several defendants, they will each assume equal liability for the full amount of the judgment, regardless of their relative fault in causing the damages. Nevada now requires the court to assign a percentage of fault to each defendant, from zero to one hundred, with the total equal to 100 percent. Every defendant found liable is required to pay a share of the total judgment no greater than his or her fault.

NV vs. DE

This is one of the biggest questions we are asked on a daily basis. The following chapter will lead you through some of the differences between the two states and point out some advantages and disadvantages. Please feel free to flip to page 13 for a quick chart on some of the specific differences.

What about Nevada vs. Delaware?

The main rights in Delaware law benefit shareholders of public corporations. This attracts large, public companies that trade on various exchanges across the country to provide the best protection to their shareholders. Delaware's corporate law, with regards to corporate takeovers, is the strongest in the U.S. However, for everyone else, the following chart illustrates several benefits of Nevada over Delaware:

Nevada vs. Delaware
It's No Secret: Nevada Beats Delaware!

Nevada's liberal incorporation laws offer more privacy and less disclosure than the once popular Delaware, making it the most advantageous state in which to incorporate.

Here are some of the specific differences:

Here are some of the specific differences:

**To verify this information, call the state corporate tax department of Delaware at (302) 577-3300

**Even though this type of information sharing has not been the practice of Nevada in the past, in today's world, the IRS is realistically able to get its hands on any information they deem necessary to further the cause of "fair and reasonable taxation."

Delaware's state corporate tax amounts to 8.7%. Delaware also requires disclosure of the principal place of doing business outside the state, requires the corporation to report the actual number and value of its stock, and freely exchanges information with the IRS.

In addition, Nevada's corporate legislature has recently surpassed Delaware's in its efforts to ensure that the rights of small corporations are protected. Delaware, for example, adopted a statute that allows the corporation to limit the liability of a director for monetary damages. However, it has far to go to be compared to similar statutes adopted by Nevada. For example, the following are acts for which officers and directors would be protected under Nevada law, but exposed under Delaware Statutes:

• Acts or omissions not in good faith.

• Acts by officers are not exempt from monetary damages under Delaware law.

• Breach of a director's duty of loyalty.

• Transactions involving undisclosed personal benefit to the officer or director.

• Acts or omissions that occurred prior to the date that the statute, which provides for indemnification of directors, was passed and approved.

One requirement Delaware has is that an officer must reasonably believe that he or she is performing his or her duties in a manner that is in the best interests of the corporation. This requirement is not present in Nevada.

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