Entrepreneurs are wise to consider a Limited Liability Company as the form of business entity under which they operate their small business. Among the advantages are:
- Limited liability
- Pass-through taxation
- Ease of set-up and administration
If you are considering forming an LLC in Nevada or California, there are many similarities and one primary difference.
The LLC Process
Establishing your LLC as a legal entity in either state involves a very similar process. It is necessary to select a business name that is both unique and also does not cause confusion with an existing business name. Both states require the filing of articles of organization as the primary document establishing the business. After the respective state receives the articles of organization, additional documents are required, which provide some basic information about the business’s organization. Additionally, depending on the nature of the business operation, additional licenses and permits may be necessary. It is also necessary to name a registered agent who can receive service of process documents and official notifications and communications from the state.
Stronger Corporate Veil
For most, the primary concept behind the formation of an LLC is to protect personal assets from business liabilities. The legal theory that affords that protection requires maintaining a separation between the individual and the business; if a business creditor can prove the LLC is the alter ego of the individual, the corporate veil may be penetrated. Because LLCs are relatively new, there is less history for piercing the LLC veil as opposed to a typical C corporation. By statute and case law, Nevada requires a showing of some ill-will or fraud on behalf of the individual business owner to prove an alter ego scenario and provides that an individual member is not a proper party in actions against the business. In contrast, California case law has established multiple scenarios under which the corporate veil may be pierced.
Contact a Reno Corporate Services Lawyer for Legal Advice
Forming an LLC in Nevada has many advantages and for some situations and some disadvantages. To explore your best options in forming a business entity, call the Sutton Law Center at (775) 824-0300.