The Nevada Dual Corporate Strategy

The dual-state asset protection strategy is a unique plan because it allows for both asset protection and potential tax savings. The strategy is really quite simple. It is nothing more than two businesses doing business with one another. Let’s take a look at some of the particulars of the strategy to see how it all works.

Example:
Let’s say you borrow money for your business or for your personal needs. The lending company will want you to sign a repayment schedule, and they will want to protect their interests in the unlikely event you fail to make your monthly payments because if you did fail to make your payments, the bank could lose the money it loaned you and the interest it was to earn on the loan.

Therefore, in order to protect itself from this contingency, the lender will require collateral or security from you. How much collateral will they require? If the lender were forced to foreclose on the obligation because of your failure to pay back the loan, they would need to have access to assets with much more value than the outstanding loan amount because when assets are sold, the new buyer usually pays much less than fair market value. Thus, the lender will want to seek significantly more collateral than the loan amount. Generally, the lender would collateralize all of your assets to secure the loan repayment.

In order to insure their legal rights they will need two things: First, they will want a security agreement. A security agreement is a contract between the borrower and the lender which details exactly what is being offered as collateral for the loan. Second, the lender will want to perfect their rights under that security agreement by placing encumbrances on the assets. An encumbrance is a UCC-1 Financial Statement for personal property and a Deed of Trust or Mortgage on real property. These documents essentially tell the world that the bank is now in first position as far as creditors are concerned. The law refers to this as establishing the priority of claims or “First in time is first in rights.”

If there is a lawsuit brought against the borrower, the lender has established the priority of their obligation. Hence, they get paid first. However, what if you were the lender? As the lender, you would have established priority over any subsequent creditors who came about after this agreement. Also, you would be able to reduce your state tax obligation.

This is the real beauty behind the dual-state asset protection strategy: Not only can you protect your assets but you can effectively reduce your tax liability by shifting income from your home state to a no state tax jurisdiction.

How do you utilize this strategy for you and your business? Corporate Services & Associates corporate strategists puts all the pieces together so that you can enjoy the benefits without all the headaches of learning how to implement everything yourself. It’s simple, complete and proven to effectively reduce your litigation exposure and save you taxes. The dual state strategy works for most businesses and makes good sense in these litigious times