Nevada Legislature May Prohibit The Establishment of Corporations For “Illicit Purposes”

Nevada’s legislature meets in regular session every other year for 120 consecutive calendar days. Nev. Const. Art. II, § 4 and NRS 218A.078. Although the 77th session does not start until February 4, legislators are already introducing bills.

Because Nevada is often associated with legalized gaming and prostitution (the latter only in certain counties, see NRS 244.345), it may come as a surprise that its current Secretary of State, Ross Miller, is sponsoring a bill, SB 60, to prohibit the establishment of a corporation for an “illicit purpose”. NRS 78.030(1) currently authorizes the formation of a corporation “for the transaction of any lawful business, or to promote or conduct any legitimate object or purpose”. Cf. Cal. Corp. Code § 202(b)(1)(A) (the purpose of the corporation is to engage in any lawful act or activity”. Therefore, the formation of a corporation for any unlawful business is already unauthorized.

The bill uses the word “illicit” rather than “unlawful” (the opposite of “lawful”) currently in NRS 78.030(1). While “illicit” is generally understood to mean contrary to law, it connotes actions that while not strictly illegal transgress societal norms as when the Roman senator and historian Cornelius Tacitus described the Emperor Nero as per licita et illicita foedatus (“having polluted himself by everything permitted or forbidden”). Annales 15, 37. I’m aware of only three Nevada statutes that use the term “illicit” (NRS 207.380, 453.151 & 453.332).

SB 60 also takes aim at the practice of “dummy” officers. See Dummy Officers Are a Dumb Idea. The bill would amend NRS 78.150 by adding a requirement that the annual list include a declaration that “None of the officers or directors identified in the list has been identified in the list for the purpose of disguising the actual control of the daily operations of the corporation, for the purpose of evading the creditors of any person or for any illegal purpose.” A similar requirement would be imposed on foreign corporations by amendments to Chapter 80.

For more about Nevada corporations, See Bishop & Zucker on Nevada Corporations and Limited Liability Companies.