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Incorporation Lawyers Discuss Incorporating vs. Forming an LLC

Incorporation LawyersThe type of legal entity you choose to operate your business as is an important decision that can have long range consequences. One of the highest priorities for most business owners is shielding their personal liability. Both a traditional corporation and a limited liability corporation accomplish this goal, but there are other advantages and disadvantages to each.

Formation

In Nevada, forming an LLC is a relatively simple process; select a name, file articles of organization and appoint a registered agent are all that is required, although incorporation lawyers typically advise that the preparation of an operating agreement is good practice. A corporation has greater requirements, including;

  • Selection of a corporate name
  • File articles of incorporation
  • File the list of officers
  • Appoint a registered agent
  • Set up the corporate record books
  • Appoint initial corporate directors

Subsequently, the initial board of directors meeting will be held, at which time the initially appointed directors will appoint permanent corporate officers, adopt bylaws and, if desired, authorize the issuance of stock. The minutes of the meeting must be recorded, as well as the minutes of each of the regularly scheduled meetings. An LLC has no requirement to hold meetings.

Management

Corporations are characterized by formal, highly centralized management structures. Authority is vested in a board of directors that is elected by the shareholders. The board in turn appoints the officers who are responsible for the operation of the business. As incorporation lawyers can explain, the laws governing LLCs allow great flexibility in management, but most operate as either member-managed or manager-managed. Member-managed means that each member has the authority and ability to act on behalf of the business. In a manager-managed LLC, typically one member is designated as manager. Alternately, some LLCs are managed by an outside manager.

Taxation

One of the interesting options a business owner forming an LLC has concerns taxation; an LLC is not taxed as an entity unless it chooses to be taxed as a corporation. Otherwise, taxes flow through the LLC and are reported on the members’ individual returns. LLC members are not employees so no taxes for Social Security and Medicare are withheld from distributions. Where a member is working in the business or managing it, he or she is required to pay these amounts, also called self-employment taxes for business owners, from the distribution. However, incorporation lawyers emphasize that members who are not engaged in the operation of the business do not have to pay these taxes. Corporations pay a tax as an entity. Profits may or may not be distributed to shareholders, but when they are, there is no requirement to by self-employment taxes. An officer, who may also be a shareholder, may be paid a salary, which is subject to tax withholding.

Contact Incorporation Lawyers for Legal Advice

If you are just starting a business or feel your business has grown to such an extent you need greater protection, the most appropriate type of entity is an important consideration. Get the facts and explore your options. Call the Sutton Law Center, an incorporation lawyers group, at (775) 824-0300.

What You Should Know Before You Incorporate in Nevada

gavel Incorporate in Nevada

If you are looking for the best location to choose for incorporating your business, there are many reasons to incorporate in Nevada. Nevada corporations are suitable for many different types of businesses, but there are many myths and scams that are spread about the process.

Choosing a Nevada Corporation

There are numerous advertisements extolling the various benefits of incorporating in Nevada. Nevada is known for liberal incorporation laws and tax policies that favor businesses. While Nevada does offer many pro-business benefits, including strong privacy laws, asset protection and tax advantages, there are downsides as well. California law does not require companies to incorporate in their home states, but there are dangers to incorporating outside your home state. California has long established case law that it applies to any corporation doing business in California, which could have numerous disadvantages.

Benefits of Incorporating in Nevada

If you will actually be operating your business out of Nevada, it is generally advantageous to incorporate in the state. If your office is in Nevada, or you have a warehouse in Nevada which you use as your shipping headquarters, Nevada’s favorable laws may apply to your corporation. Nevada corporations do not pay a state tax or an annual franchise tax. In California, any business that does business in the state of California is required to pay a minimum of $800 in franchise taxes. In Nevada, it is extremely difficult for someone to seize your personal assets or that of your shareholders to pursue debt owed by your corporation. The Supreme Court of Nevada has a history of protecting the privacy of Nevada shareholders and directors, even when a corporation does not adhere to basic formalities. Unlike California and most other states, Nevada does not require corporate shareholders to disclose personal information. This means it is possible for shareholders to be nearly anonymous as long as the Nevada corporation does not engage in business in another state.

The Loss of Benefits When a Nevada Corporation Does Business in California

Doing business in another state such as California results in the loss of many advantages for Nevada corporations. California’s pseudo-foreign corporation laws state that once a foreign corporation does business with California, it is required to register in California. A foreign corporation must qualify under California’s business practices when it engages in repeated transactions within California. There are sanctions for failing to qualify, including civil penalties that can damage your corporation. There is also the risk that contracts may be rescinded if you fail to meet these qualifications. In order to register as a corporation in California, your Nevada corporation must pay a franchise tax, apply for a business license and disclose its officers and directors. This lack of privacy is one of many reasons why Nevada corporations choose to avoid doing business in California. Your Nevada corporation will also have to prepare and file two different tax returns in Nevada and California. This means that if your corporation ever stops doing business, it will also have to file two final income tax returns to shut the business down in both states. While California is one of the most restrictive states when it comes to business law, foreign corporations face even more restrictions.

Summary

These reasons should help you proceed with caution when it comes to weighing the pros and cons of incorporating out of your home state. In order to receive the most personalized counsel when it comes to deciding where to incorporate your business, you should consult a reputable attorney. An attorney may be able to provide guidance in the local laws that will affect your corporation and offer an honest perspective on whether incorporating in Nevada is right for you.

Contact a Lawyer for Help Deciding Whether to Incorporate in Nevada

Call the Sutton Law Center today at (775) 824-0300 for help with the decision to incorporate in Nevada.

 

 

Our Asset Protection Attorney Discuss Business Structures and Taxes

gavel Asset Protection AttorneyEntrepreneurs pursue marketplace opportunities serially and simultaneously. They create multiple business forms and entities for their varied endeavors to limit their legal liabilities. Such business entities may be limited liability companies (LLCs), C or S corporations, or partnerships. Each in its own way protects personal assets from risks of lawsuits and claims against the business. In recent years, the formation of layered business entities has become increasingly attractive to entrepreneurs starting new businesses.

Multiple Business Entity Structures

Big business websites display multiple business entity structures in fine print. Large businesses have followed for decades the practice of layering a business entity form beside or with an operating business.

The layered, multiple-entity structure strategy establishes one entity as the operating business holding very few assets and another, related business to hold valuable patent, trade secret, software, website, and other intellectual property assets as a holding company. Similarly, a separate entity may hold real estate for business operations.

The enterprise assets are apart from its potential liabilities in two or more separate business entities. Such entity layering requires careful drafting of leasing, licensing, and management agreements among the business entities.

Tax Consequences

With multiple business entities, the entrepreneur can limit exposure of personal and business assets to liability and realize certain tax consequences. LLCs, partnerships, and S corporations feature pass-through taxation. Taxation of a C corporation is at both the corporate and the personal levels when it pays dividends to shareholders. Regardless of the number of entities formed, the entrepreneur should consider carefully all of their tax consequences. Multiple layered-entity structures may include any of the following combinations:

  • An LLC owning multiple LLCs
  • A limited partnership owned by a general partner entity and individual limited partners
  • An S corporation owned by a single-member LLC
  • An S corporation owned by a limited partnership of all individual partners
  • An S corporation owned by another S corporation with one individual shareholder
  • A C corporation owned by a trust, an LLC, or another C corporation

Each business entity has its own taxation treatment at federal and state levels. As to entity structure, whether multiple entities operating in tandem or layered multiple entities, it is wise to consult both legal counsel and a tax adviser familiar with state corporate and tax laws. Decisions on how to title and record assets on accounting records require considerable care. Asset title or ownership issues may be important in any sale of one or more of the businesses.

Talk to an Asset Protection Attorney

S corporations, C corporations, LLCs, and limited partnerships are business entities for asset protection purposes. These very affordable structures shield personal assets from business risks and business and real estate assets from personal judgments

Use of several business entities can protect assets. If one LLC owns five rental real estate properties, a tenant injured at one property with a claim against the LLC, which owns five rentals, could reach all five properties. A better way is to segregate the assets into five separate LLCs. A key asset protection strategy separates assets to lower the exposure of each to claims.

The right mix of entities can be important for asset protection. A combination of both Nevada and Wyoming LLCs, limited partnerships, and corporations can implement an effective asset protection strategy. An asset protection attorney consultation can be very informative and ultimately very rewarding. Contact the Sutton Law Center at (775) 824-0300 today to schedule an appointment.

 

We Can Help You Incorporate in Nevada

books and gavel Incorporate in NevadaRegardless of the industry you are in, incorporating in Nevada is a great way to grow your business and set yourself up for success by protecting your personal assets and investments. Nevada attracts entrepreneurs from many industries with robust asset protection laws and strong privacy rights. We have helped clients in industries that include tourism, hospitality, construction and many more. Nevada has a dynamic economy and you should take advantage of the all the opportunities it has to offer.

If a incorporation is not ideal for your situation, forming a limited partnership (LP) or limited liability company (LLC) may be a viable option that we can discuss. One of the most important steps to take is deciding which type of business entity is most appropriate for your company. There are many pros and cons depending on your industry, your business goals and potential tax liabilities.

Requirements for Incorporation

There are certain minimum requirements in order to form a incorporate in Nevada, and your will first step is to acquire a business license. Failure to follow the proper formalities can subject your company to legal consequences and leave you open to personal liability if you are not subject to corporate protections. At The Sutton Law Center we offer comprehensive corporate formation packages for reasonable, flat-rate fees. Our services include all of the following:

  • Obtaining business licenses
  • Preparation of necessary documents, including: Bylaws, Operating Agreements or partnership agreements
  • Initial state filings to apply for any other licenses, permits or other specialized documents required by your particular industry
  • Stock agreements
  • Assistance with corporate name searches to make sure that your business filings are not rejected
  • Registered agent services to ensure that important documents are received and securely stored
  • Day-to-day management issues such as director, officer and shareholder logistics

Another important aspect of starting a business is determining how you will capitalize your business and manage any shares of stock that are issued. Equally important is making sure that your shares are protected if you are involved in a corporation or partnership where the company’s assets are divided among many people. A corporate lawyer can ensure that your ownership interests and investments are not compromised.

Want to Incorporate in Nevada? Call Us!

If you or your business partners have any questions about incorporating in Nevada, our skilled corporate attorneys can help. Call The Sutton Law Center today at (775) 824-0300 for a consultation.

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