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Elon Musk and Other Billionaires Recommend Incorporating in Nevada: Here’s Why

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April 10, 2024
Author: NCH

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About the Video

In this episode of Wealthy & Wise, NCH’s Founder and CEO, Cort Christie, alongside NCH’s Executive Business Consultant for Senior Business Division, Shannon Hymas, will tackle why billionaires like Elon Musk are choosing to relocate their companies from Delaware to Nevada.

The discussion centers around Elon Musk’s decision to move his companies from Delaware to Nevada after encountering legal challenges with Tesla’s bonus plan. The conversation emphasizes the advantages of Nevada’s business-friendly environment, including legal protections, tax benefits, and ease of incorporation. Shannon highlights that businesses can benefit from Nevada’s laws and support without physically relocating to the state.

Prefer to read? A full transcript is provided below.

Cort: Hello and welcome to another edition of Wealthy and Wise. I’m your host, Cort Christie. And today we’re going to be talking about why billionaires are repositioning their companies to Nevada from Delaware. We’ve had a big thing hit the news. And I brought with us today, Shannon Hymas. Shannon is an expert on Nevada-based business entities and is one of our top business advisors at NCH and has been supporting the needs of small business owners for years and years.

So, thanks for coming on the program today.

Shannon: Thanks for having me.

Cort: Absolutely. So billionaires are now teed up to move their businesses from Delaware to Nevada, and some are even going to some other states. But Nevada has been the focus of Elon Musk’s recent tweet. And this is a big, big story that’s out there is Elon had this enormous bonus plan put in place with Tesla. And basically, he took no salary, no income.

But what he did as the CEO of Tesla, he said, if I can grow the company to this extent, and I can’t remember exactly what it was, but it was tremendous. It was like 400 or 500%. Then he would get his bonus kicked in, and what ended up happening was that he hit the mark. And so it was coming time for him to pay his bonus. And I’m really dumbing this down. But a shareholder with I think, nine shares and challenged it in a Delaware court to their Chancery court, which is their business court, and they basically said, you can’t have your bonus for whatever reason. And this is a court system that’s designed to support the needs of corporations, and publicly traded companies like Tesla. And here’s the CEO of the company that was denied his bonus by this judge in Delaware. So immediately he goes out and tweets, I’m moving my companies out of Delaware. Delaware is not a smart state to be in. Delaware is not a state where the courts are supporting the businesses, and in this case, that the primary shareholder, the CEO of the company, and it is getting appealed, he may win on appeal.

Ultimately, in Delaware. But the reality is, you want to be in a jurisdiction that’s going to support the needs of the companies, whether you’re a publicly traded company or you’re a small business owner. You know, as we’ve normally serviced in Nevada now, many other companies are starting to migrate and consider moving out of Delaware. Even the state that has hundreds of years of history behind it, they’re saying it no longer can they trust in the laws.

If they’re not going to be defended by the court system, they’re properly they’re going to go look for a more conservative jurisdiction that’s going to look out for the interests of the CEOs of companies and the primary shareholders, like in Elon Musk’s case. So pretty cool stuff.

Shannon: Oh, yeah. First of all, I think that it would be kind of, a bad problem to have that I wouldn’t take a salary and just be able to live without being this crazy, crazy, goal. And then this will be my bonus when I get there. But yeah.

Cort: It’s a huge bonus. But the board of directors signed off on it, and they all approved it years ago. And now all a sudden it comes to roost and they’re saying it’s not fair. So what’s interesting about it is it’s created a big stir. And the big stir has been with a lot of publicly traded companies now saying, wait a minute.

If this is the direction that Delaware is going in, which was the state for every publicly traded company, now we’ve got to go find another state like Nevada to consider coming to. And the stir, there was a recent, couple of articles in the Las Vegas newspaper. The Secretary of State has been all over this. he has been very active.

In fact, he called me and we had lunch two weeks ago just to talk about this whole thing that’s been going on. And, Cisco Aguilar has his name. He has been our secretary of state for the last two years, very dynamic, and very engaged. And he wants to attract more business to Nevada. And figure out what is it going to take to bring publicly traded companies, bring entrepreneurs to Nevada because of our amazing laws. And I know there’s going to be a big storm from this in a positive way for the state of Nevada because more companies can literally move from where they are today and re-domesticate and basically move their headquarters for where they formed their business entity, and then they gain the advantage in Nevada laws, which is exactly what Elon’s doing it. And he’s going to do it with a few of his companies, right?

Shannon: Yep. and the cool thing is, a lot of people are just getting ready to start their businesses, and we get to learn from other’s mistakes. So when you’re looking at the foundation of your business now, you know that Nevada is one of the best ones out there. I’m just saying. Elon is bringing all of his stuff over here. We’ve got the best laws. And when you’re looking at setting up your new business, you want that foundation to be laid appropriately. So why not start off on the right foot so that moving forward, you know that you’ve got the legal protections, you’ve got the tax benefits, you’ve got everything that’s there in your corner already? Yes. So that you don’t have to reinvent the wheel later.

You’ve already got it. So, I’m glad that he’s actually, unfortunate that things have happened, but I’m glad that that he’s so vocal about it because it’s allowing us to support others in different ways because he’s creating that buzz, because anytime he speaks, people listen. So, we’ll take that. And it’s allowing me to educate people that are getting ready to start small businesses, start bigger businesses, or that are already, you know, larger scale. It allows us to support them and show them everything that we have to offer here. And we’ve just been waiting. Come on over.

Cort: Absolutely. We love it. And we, and we can help companies that are already incorporated in other states reincorporate. So you keep your history, you keep your tax identification number. You don’t have to do anything with your accounting systems. You just change where your headquarters, your location, and where you’re originally domiciled is the term the legal term that’s used for that. And in Elon’s case, he moved Neuralink over here. Tesla’s already had a footprint here because they have a huge Gigafactory in northern Nevada. They also have the big plant that they just, opened up this last year in Texas that’s manufacturing vehicles now. So he’s going to move more. And even The Boring Company, which I love, the name of The Boring Company, is literally a company that bores, as some of you are aware, and from the Las Vegas Convention Center to the Resorts World, he has literally dug about a mile trench. And it’s a place for cars to run underground, to get to and from the ends of the convention center and this particular resort. And there’s a plan to build tunnels underneath the Las Vegas Strip so that they can get a lot of the traffic off the Las Vegas Strip and open up, more of that flow, as things go along.

So, lots is happening. But what happens is it creates a buzz, and it creates energy around it. And people are now wanting to know why. Nevada, what is it about Nevada? Because so many people incorporate in their home state, and there’s absolutely nothing wrong with that. But you’re not getting the best protections in your home state like you are if you choose a state like Nevada.

And now tell us why. What is it that these new business owners, or these people that are wondering what the heck is about Nevada, that’s so different? We all know it’s a state that has some unique elements. There’s gambling and you know that things never closed down. You can walk down the strip with a drink if you want to, in your hand, and nobody’s going to tell you to get rid of it.

But when it comes to business formations and forming LLCs like we do hundreds and hundreds of every month, why should they consider Nevada?

Shannon: Well, because Nevada’s the best. But because when you incorporate in Nevada, you get to operate wherever you happen to be physically located. You get to operate under the laws of Nevada. So under Nevada law, unless you’re out there intentionally committing fraud, you’re trying to go out there and be a shyster and you’re selling the Statue of Liberty to somebody, which please don’t do, then you’re not intentionally committing fraud.

You’re not doing fraudulent things. You will have the best legal protection possible, and you don’t have to worry about some of the smaller things that happen under other state laws where if, you know, I hadn’t done this part right and I didn’t know what I didn’t know, I didn’t know it was an accident. Well, now you’re getting sued personally.

They’re going after you, your wife, your assets all of your other stuff. So when you’re setting up your entity, you want it to be you over here and your business over here like a whole another person. So if something happens with the business, they can sue the business, but you don’t want them to come and sue you. Under Nevada law, you’ve got the best legal protection, so you really are separated. So you just stay on over there and we’re going to operate the business over here, and we’re going to do everything that we can to do everything correctly. But heaven forbid something happens and you didn’t know that you were not doing this part right, or you didn’t have something right in your book or something.

You don’t want to be sued personally for something frivolous like that. And they’re very important things that you should do. But a lot of people, especially when you’re starting new businesses, you don’t know all of the rules when you start driving a car. I love the fact that in that article, you who you’d mentioned car insurance and stuff, when you start to drive a car, you know that, you know, you put the key in and then you turn left and then there’s turn signals and then there’s mirrors.

But do you really know why it starts to revolve and the tires turn this way? And so you don’t know all of that stuff, but not knowing that stuff can get you in trouble. You can get in an accident. You can if these are things that we don’t need to know all the high-level intricacies of all of this stuff, but if we don’t know, they can hurt us. Yeah, yeah. And in Nevada, you don’t have to worry about those little things that I didn’t really know were going to hurt me.

Cort: It’s kind of like, because it’s new, as you mentioned. And for everybody that’s starting a business or is in business, there’s a lot to think about and a lot to understand and digest. But when you have a state like Nevada, with its special laws that are there to look out for the interests of the business owner, the one that’s running and managing the company on a day and day basis.

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Shannon: Risking everything

Cort: And you’ve got a state that’s got your back and our laws, our case law, the judges, the court system. Everybody understands how this works. And so it’s not a mystery when you might have a lawsuit show up in the Nevada court. They know that here are the rules in our state. And we’re going to look out for the business owner. And that’s how it works.

Shannon: And they’re in writing, the laws. It’s not just well, this happened to so and so when you’ve got case law to go by, which is happening in other places here, there’s statutes where in other states as well, this is what they ruled on before and they decided this. So I’m sorry you’re in trouble too.

Cort: So, Shannon, all day long you’re talking to people. And one of the things that we do at NCH is we offer free consultations to anyone that’s thinking about starting a business. Or if you’re already in business, they’re thinking about moving to Nevada, even if it’s not, you’re not physically and we’re not talking about physically moving to Nevada.

We’re talking about moving the state where you form your business entity in and changing that state. But what are some of the common questions that you’re getting on a day in, day out basis as you’re talking to thousands of people?

Shannon: Do I have to move to Nevada? No. Do I have to have an office in Nevada? New, Do I have to come there to open up my bank account? No, you don’t have to do any of that. So, you never actually even have to set foot in Nevada to be able to set up a Nevada entity. You just have to call us, and we set everything up for you. But then we do what’s called foreign file your entity into the state where you’re actually doing business. So, what that does is let’s just say that, for lack of a better word, your business was born in Nevada. So, it gets the rights of the citizenship of Nevada, but it’s going to go off to college or it’s in college now and it’s going to be doing business in this state, which is where you’re at now.

We do a process called foreign filing that allows you to operate your business in that state where you live, but under the laws of Nevada, where you were born, and you get those rights, they follow you so that you can operate there and have that peace of mind. And those are the biggest questions I get is as well, I do have to come there to say, well, what do I do? Don’t worry, we got you, call.

Cort: Which is so interesting. I was just talking to, a fellow business owner, and they were going to need some legal services, and this was in California, and we’re talking about whether or not, you know, they needed to go meet with this particular attorney for this situation. And I said, why do you need to sit down face to face in today’s world? You don’t need to. I mean, come on, this is not, you know, ten years ago, 20 years ago. But in our case, these are logical questions. Do I have to come and sign a signature card for a bank account? Like if I’m going to have a bank account, I’m going to set it up in Nevada. You don’t have to set it up in Nevada.

You can set it up in your home state. We do have banking relationships with national banks like Bank of America. And so essentially, we get the account set up for you. But you don’t have to ever set foot in Nevada. What you do need is what’s called a registered agent. And you have to have a legal address. And that’s what we represent for every one of our clients. But the best part about that is because we’re looking out for your interests as your legal address. You can call us anytime with any questions about your business entity. And that’s part of you know, what I think gets missed with other companies that can file LLCs or corporations for any business owner is they don’t have the level of support or sophistication.

We’ve been helping entrepreneurs register companies in all 50 states, with a focus on Nevada for 34 years now, between our two brands, we’ve got another company in Reno that also focuses on business formation. but we’ve been here in Nevada supporting the state. This is why the secretary of state calls me when there’s a big publicity thing going on. It’s like they want us to be a part of helping spread the message, you know because the firms that market the benefit of Nevada are registered agents are formation companies like ours. Now, if you look at a big 50-state company, we’ll use, an ancillary competitor like LegalZoom as an example. They don’t care what state you form your business entity, and they don’t specialize in any state.

What’s nice about NCA is we can register you in any state. We can form your LLC in any state. But what we prefer to do is help you register in Nevada. And then as you mentioned, foreign file, which is a term that’s used to take your Nevada LLC and make sure it’s legally doing business in the home state where you operate from.

And it’s just literally a two-step process. Register your company here first. Secondarily, register your company in your home state. But what you get in that first registration are all these laws behind you to look out for you and protect you from business liability. And as you mentioned, business accidents, because business accidents happen, everybody has to deal with it.

If you’ve been in business long enough, there’s going to be lawsuits, there’s going to be litigation. It’s just the nature of business, unfortunately, in the United States of America.

Shannon: Yep, absolutely.

Cort: A lot of good stuff. we just want to talk about the fact that all these billionaires are now moving businesses to Nevada. And normally in our history, we’ve always serviced the needs of small business owners. Now, you’re talking about publicly traded companies that are re-domesticating, filing, and setting up their foundation in Nevada. And I think the first one that Musk moved was Neuralink and, literally went through the process and they actually reached out to the Secretary of State, want to make sure that they had everything done.

I saw it recently. Is it, Travelocity also is just in the process of moving as well. They’re owned by a large conglomerate. I won’t say the name of that conglomerate, the family that’s behind it, but they’re moving assets from other states and moving them to Nevada. But the businesses aren’t physically moving, just the business entity is moving. That’s the big difference here that everybody that’s watching today can take advantage of.

If you’re operating a company today. Now, if you’re brand new to business like so many of our viewers are, it’s just another reason to take advantage of the uniqueness of Nevada that everybody should be considering.

Shannon: Exactly. Pick up the phone and give us a call. We’ll be happy to discuss anything that you have going on and give you the best course of action for you because for some people, it may be that they’re going to go with the Elon Musk route and he’s going to re-domesticate. But for most Small businesses and things like that. Or even if you set something up in your home state, you might not know if you did it right. It might be better to just let that go and start fresh in Nevada, which is actually a much easier process because you don’t necessarily want to bring something that you don’t know you did right.

Let us discuss it with you and see what’s best for your specific circumstance, and then go from there. Because it’s not a blanket statement. It’s not a cookie-cutter. What’s right for your business might not be right for their business or their business. So let us have a conversation with you and guide you.

Cort: Everything good starts with a conversation here at NCH. So you get to talk to Shannon. You get to talk to one of our other consultants that are here. We’ve got a team there. Fantastic. And I just think it’s worth everyone’s time because we charge nothing for that consultation. You’re going to learn something. You’re going to spend nothing if you decide to not move forward with us. But you’ll be a lot smarter at the end of that conversation. So, Shannon, thanks for educating us today about all this crazy buzz that’s going on out there. And thanks for everything you do to support the NCH clients.

Shannon: Thanks for having me. thanks for letting me do it every day. Have a blast. Cool. Pick up the phone. Give us a call. You’ll have fun, too.

Cort: All right. There. You heard it. Well, everyone, thanks again for tuning in to another edition of Wealthy and Wise. I’m your host, Cort Christie, CEO and founder of NCH. And please be sure to like and subscribe. We love it when more people come and, we’ll be posting more videos every month. Information that you need to know is a small business owner, how to protect your assets, how to reduce your taxes, how to launch new businesses in the right way, and a lot of the services that we provide to small business owners that are so important, like legacy planning and estate planning services, that you can take advantage of small business taxation, how to get it right, how to find the right firm to do it. There’s a lot of information that we have on our channel. Please peruse it, go through it, and learn more from us. Thanks again for tuning in.

 

DISCLAIMER: The above material has been prepared for informational purposes only, containing opinions of the provider, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. Please consider consulting tax, legal, and accounting advisors before engaging in any transaction.

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