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Secretary of State Ross Miller Aggressively Targets Fraudulent Home Business Exemptions of Nevada Business Licenses; Nevada Losing Tens of Millions in Revenue
SoS Stops Taking Online Applications Claiming Home Business Exemption; Verification Now Required
Posted Date: 8/5/2011
For Immediate Release
Contact: Bob Walsh, Deputy for So. Nevada/PIO
(702) 486-2450
rwalsh@sos.nv.gov

(Carson City, NV: August 5, 2011) – Nevada Secretary of State Ross Miller is aggressively targeting businesses claiming a home-based business exemption on their Nevada Business License. Miller says the filings, which are often intentionally false, are costing the state tens of millions of dollars in unclaimed revenue and placing an unfair disadvantage on businesses that comply with the licensing regulations. As of Saturday, August 6, 2011 any business applying for a license and claiming the exemption will be required to provide specific information that will verify the business’s location as a residence and net earnings of less than $27,000 per year. Letters requesting verification are being sent to the more than 60,000 businesses already claiming the exemption, and businesses that do not respond will have their license status revoked.

“Our investigations indicate to us that there are an inordinate number of businesses claiming the home-based exemption, and many of them are nothing more than out of state shell companies,” says Miller. “We’ve either got a whole lot of people who are engaged in fraudulent filings and are lying about the nature of their business, or we do in fact have shell companies that serve little legitimate purpose in terms of commerce. A narrow special interest group, the Nevada Registered Agents’ Association, has indicated that they intend to institute legal proceedings to prevent my office from verifying the legitimacy of these exemptions. They seem intent on ensuring that out of state shell companies can continue to game the system.”

In April, 2011, an Executive Branch audit of business license filings in the Secretary of State’s office found that a significant number of businesses are falsely claiming they are exempt from paying the annual business license fee. The audit found the state will experience nearly $11 million in lost revenue in the next fiscal year due to the significant increase in the number of businesses that falsely claim to be exempt from annual business license requirements. The law requires any person or entity that performs a service or engages in a trade for profit to obtain an annual state business license. Home-based businesses that currently make less than $27,000 a year in net earnings are exempt from the requirements, as are a very limited number of other types of business.

The Secretary of State’s office also conducted its own internal investigation of a limited number of businesses and could not detect a single instance where the identified businesses were properly claiming an exemption. The investigation found that 73% of the entities investigated were falsely claiming the business license exemption. The remainder of the entities did not responded to inquiries from investigators and their charters to do business in the state revoked.

“Having those kinds of companies registered in Nevada is the reason we have been identified in numerous federal reports as a preferred incorporation jurisdiction for money launderers, mountebanks and criminal enterprises. However, federal legislation attempting to weed out the bad actors by overhauling the corporate formation process is burdensome and not business-friendly, and we have successfully resisted that to this point. But the ongoing activities of registered agents who facilitate the formation of shell companies make it increasingly difficult to fight the federal attempts. When you consider that, it’s clear that we need to clean up our own house before Congress tries to do it for us.”

As of Saturday August 6, 2011 the Nevada Secretary of State’s office will no longer accept any online business license applications that claim a business license exemption. Any such filings will require a completed notarized form that provides verifiable information of the home-based business, including the residential address and net earnings.

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