It seems that Nevada corporate law allows corporations to issue so-called "bearer" shares. That is, the legal owner of a share of stock at any given point in time is the individual who has physical possession of the stock certificate. The theory is that if your client gets wind of a creditor who might attempt to attach the stock, he just transfers physical possession of the stock to a willing
Jonathan Alper quickly shoots down this theory:
The problem is that the creditor protection of Nevada bearer shares works only if the creditor asks only if the debtor currently owns any corporate stock. In real life creditors can ask as many other questions as they want in an effort to locate assets subject to execution. For example, a creditor can ask if the debtor has owned any stock in the past years, and if so, what happened to the shares. A debtor must produce income tax returns. Tax returns include taxable income or losses from corporations and other investments. A creditor may ask about the current location and possession of any shares of stock which correspond to taxable income. A diligent creditor attorney will likely find out about any "bearer shares" a debtor owned previously and the current location of such shares. Giving possession of bearer shares to another person without fair consideration will likely be discovered and reversed as a fraudulent conveyance. I have never found any advantage for a Florida resident to establish corporations or LLCs in Nevada or any other state unless the Florida resident owns property or does business in the other state.In Maryland, the scam would be even easier to demolish. All the creditor has to ask is whether the debtor owns legal or equitable title to any interest in any trust, business trust, partnership, limited liability company, or corporation. Notwithstanding the transfer of bare legal title to the individual possessing the physical stock certificate, it would seem clear that the transferor retains an equitable interest in the stock. Thus, the debtor has to either 'fess up to the ownership of the stock or perjure himself.
It seems to me that if you're willing to perjure yourself, you may as well use your home state's business entity statute. It generally has the advantage of being less expensive than Nevada.
The regularity that Nevada seems to pop up as a purported haven for the ethically challenged raises another issue: What the hell is the Nevada government up to?
It's one thing for some small Caribbean or Pacific island posing as a country to allow their business entity or trust laws to be used to scam U.S. creditors. After all, in the international arena, the law of the jungle more or less prevails. And, the countries that attempt to become tax or asset-protection havens at least have the excuse that they're basically broke and need to engage in quasi-legal activities in order to survive. However, the last time I looked, Nevada was one of the 50 states in the Union and a fairly economically successful one at that. Why has Nevada embarked on a directed and focused program to be the state of domestication for businesses that want to avoid compliance with the laws of the other 49 states?