Nevada LLC

Nevada LLC

Nevada LLC or Corporation

Potential business owners may be considering setting up a Nevada LLC or Corporation. There are many factors of starting a company in Nevada that should be taken into consideration before paperwork is filed for a LLC or Corporation.

Considerations For Forming a Nevada LLC or Corporation

Each type of business entity has its place in the business world whether its a Nevada LLC, Corporation or Limited Partnership. People who are considering starting their own Nevada LLC, S Corp or C Corp should first examine the following aspects of doing business in Nevada.

  • There are no state income taxes in Nevada.
  • State business licenses are almost always required.
  • Local business licenses are generally required.
  • If a company is planning to conduct business in a state other than Nevada, they will need to foreign file in that state and potentially pay taxes in that state for profits generated there.

The Definition of an LLC, S Corp and C Corp

An Nevada LLC is a hybrid of a corporation and a partnership when the entity is elected to be taxed as a partnership. Owners of an LLC limit their liability and avoid double taxation.

An Nevada S Corp is a corporation that has a special tax status. This tax status is designed to help owners avoid double taxation.

Nevada C Corp is simply a standard corporation that is considered to be a separate entity in the eyes of the law. Shareholders of a C Corp cannot be held liable for an amount over their investment in the company.

Pros and Cons of Each Type of Business Entity

There are benefits and disadvantages to each of these types of business entities.

LLC

– Pros

  • Protects owners from financial liability over their investment
  • Offers pass-through taxation
  • Members(owners) can be other entities or foreign citizens
  • Less paperwork than a Corporation
  • Flexible distribution of profits
  • Single member(owner) LLCs don’t have to file a tax return for the LLC, they only report activity on their personal tax return
  • Ease to set up – typically just one page document to get started
  • Ability to build a separate business credit profile from the owners
  • Added credibility over a Sole Proprietorship or General Partnership with vendors and prospects
  • LLCs can be managed by the members(owners) or by a manager hired to run the business
  • Owners can deduct business losses on individual tax returns

– Cons

  • Owners are individually taxed on the company’s profits
  • Owners are considered self employed and must pay the 15.3% self-employment tax contributions towards Medicare and social security on all profit from the LLC
  • Transferring ownership in a LLC is more difficult than with shares of stock in a S or C Corporation
  • There is less case history and legal precedent for LLCs over corporations

S Corp

– Pros

  • Avoids double taxation
  • Allows profits to be passed through to shareholders
  • Limited liability for the owners and officers
  • Only the wages of the shareholders are subject to the 15.3% self-employment tax
  • Ability to build a separate business credit profile from the owners
  • Added credibility over a Sole Proprietorship or General Partnership with vendors and prospects
  • Can attract investors to raise capital
  • Owners can deduct business losses on individual tax returns

 – Cons

  • Shareholders are required to pay taxes on profits whether distributions are made or not
  • Fringe benefits are generally not deductible
  • Any owners working for the company must pay themselves “reasonable” compensation
  • Any employee who owns 2% of more shares and receive benefits like health and life insurance are deemed taxable income
  • Shareholder and Director meetings are required with meeting minutes and or corporate resolutions
  • Must be a U.S. citizen or resident to own shares
  • Cannot have more than 100 shareholders
  • Can have only one class of stock
  • Net operating income is distributed according to the proportion of ownership for each shareholder

C Corp

– Pros

  • Provides legal protection to individuals
  • Potentially reduces business taxes
  • Owners have limited personal liability
  • Fringe benefits can be deducted as business expenses in most cases
  • Owners can split profits of the corporation with owners and the corporation, giving the ability to potentially pay lower overall tax rate
  • Ability to have multiple classes of stock
  • No limitations on who can own shares
  • The standard entity for companies looking to go public
  • Ability to build a separate business credit profile from the owners
  • Added credibility over a Sole Proprietorship or General Partnership with vendors and prospects
  • Can attract investors to raise capital

– Cons

  • Results in double taxation if profits held in the entity are paid out in distributions or wages to owners
  • Requires the filing of more paperwork to set up
  • Annual requirements of paperwork on much more than for a LLC
  • Separate taxable entity

Pros and Cons of Forming a Business Entity in Nevada

Nevada may seem like the perfect location for starting a business, but there are benefits and disadvantages to forming a company in the state.

– Pros

  • There is no state income tax
  • Certain business entities can elect to have non-economic business partners who are able to make decisions on behalf of the business

– Cons

  • Corporations in Nevada are required to disclose detailed information to the state each year
  • It is possible for customers to be wary of companies formed in Nevada because of the association with gambling

Steps To Forming an Entity in Nevada

Take these steps to form a business entity in Nevada.

– Register the name of the business.
– Apply for an employer identification number (EIN) with the IRS.
– Apply for a Nevada business license with the Secretary of State.
– Become familiar with Nevada state tax regulations.
– Obtain a local business license.

Learn more about forming a business in Nevada by visiting the website of Las Vegas.

Where To Find a Registered Agent in Nevada

Individuals will need to file paperwork with a registered agent in order to form a business in Nevada. Registered agents can be found through the Nevada Secretary of State.

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David Gass is a serial entrepreneur who has built companies from scratch with less than $200 and grown them to multi-million dollar businesses. He is an expert author and consultant for small business marketing, structuring and financing.

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