The Three Little Pigs: Are You Protected?

Which little pig do you belong to?

Three little pigs lived once upon a time. They all decided to build homes (or businesses). Let’s look at what they did and how we can learn from their example.

The first little why do guinea pigs puff up was very hurried and had little money. He did some research. He did some research and found the following.

He discovered that he could benefit from Nevada State Law because he was Californian. Nevada offered additional benefits, including no reporting of tax and no reporting by officers. Little Pig #1 decided to appoint another person as his “nominee”, in order to cut down on his taxes and keep his private information safe (just in case there was a big bad wolf). He therefore hired a big, fancy attorney to be his resident agent. The agent used his EIN number.

He listed the agent’s business address as his corporate address in Nevada, and conducted business in California. His website was beautiful and he believed he had a great business. He didn’t realize that he was actually doing business as an international corporation. He was operating his business in Nevada, and the laws there were more restrictive than the Nevada laws. Little Pig #1 heard that someone could file a lien against his home and no one could seize it.

Little Pig #1 built his straw house. We will see what happens to this pig later.

A second little pig researched and discovered that Delaware was chosen by half of US publicly traded companies, and 58% of Fortune 500 businesses (Delaware.com). This is due to the highly respected Court of Chancery. He was able to incorporate in Delaware, even though he lived in California. The second little pig continued his business knowing that Delaware would be the best place to defend him if sued by another California pig.

Little Pig #2 built his home with wood.

Little Pig #3 listened to a report that included excerpts from Paul Sarbanes (D–Md), of the Government Accountability Office. You’ve heard of Sarbanes Oxley. This is what the 2006 report says.

o According to the FBI, U.S. shell corporations are being used by the Soviet Union to launder up $36 billion. (Other countries are also included)

Nevada-based corporations received suspicious wire transfers in excess of $31,000 over two years. However, they were unable prosecuted because the owners could not be identified

o No state requires that applicants for a new corporation be formed in any of the 50 US states (review by Levin D.Mich and Coleman R.Minn).

The absence of information about company ownership in all 50 states hinders law enforcement

Little Pig #3 was shocked at how lax the state laws were. He decided he was smart enough to build his own house using bricks.

The end is near, but we all know it.

We all know that the Big Bad Wolf arrived and destroyed the straw house. California law prevails over Nevada law, and the Nevada Corporation did not offer any privacy or taxes in the end.

Little Pig #2, however, was able to make it work when he was involved in a Texas lawsuit against another company. “That guy won’t go to Delaware to sue my!” States must respect laws like Full Faith and Credit and Little Pig #2. However, the clause regarding the contract falling under Texas jurisdiction was not followed. Texas extended its long arm towards California and reached Little Pig #2’s house; the Big Bad Wolf huffed and puffy and tore down the house. Although the Wolf had to puff and huff, eventually he destroyed the house.

The brick house is well-known to all! The house was extremely strong, built using off shore trusts and off shore bank accounts. It also had a stealthy plan. Little Pig #3 was doing great. The Big Bad Wolf couldn’t blow down the house until the tragedy in the community. A group of bad pigs flew into a large building and caused a lot of destruction. People died tragically, and the government was forced to take action in the name national security.

The Patriot Act Patriot Act I & II, a national security act, changed everything. All accounts and properties that Little Pig #3 had listed off-shore were now public records. All of Little Pig #3’s bank accounts are now subject to the Banking Secrecy Law. The brick house was no longer sturdy after all the changes.

Little Pig #1 had more difficulties because the federal government encouraged Nevada to improve its force reporting and clean up its act. All fifty states then followed suit. All three little pigs reached a better conclusion.