Which Type of Nevada Business Entity Should I Use?
Consistent with an ever increasingly complex world is the increasingly complex number of Nevada business structures choices to choose from. Should you incorporate? What about an LLC? Or maybe an LLP? Or even an LLLP?
And what about taxes? Should the entity be taxed like a C-corporation? Or elect S-corporation tax status?
Should you incorporate in Nevada? Or some other state? While not limitless, the options are certainly great.
So how do you decide? Start with getting a feel for the types of entities that are available. Assuming that you are not going to do business as a sole proprietorship, that is doing business in your name individually, under Nevada corporate law, there a many options:
Choosing the Right Nevada Business Entity
Whether you already have a business in Nevada or want to start a business in the state of Nevada, you need to decide the best type of business entity in which to conduct business in the state.
Corporations
Corporations have been around forever. Shareholders own the company. Their liability is limited. The company is governed by a board of directors and the day to day operations are handled by the officers, such as the president, treasurer, and secretary.
Corporations are subject to double taxation, once on the company’s income. And then again on distributions to the owners. Alternatively, they are treated as an S-corp if the election is made by filing the proper paperwork with the IRS.
To set up a corporation, you file articles of incorporation and pay the proper fee.
Limited Liability Company
The LLC started to gain popularity in the 1990s. This type of entity is designed to combine the benefits of limiting liability for the owners and avoid the double taxation problem of corporations. However, they remain flexible enough to allow you to elect to be taxed like a partnership, C-corp, or S-corp.
There are also Series LLCs. A Series LLC is an excellent choice for holding multiple real estate properties.
Instead of being owned by shareholders, the ownership is by “members”. And instead of being run by corporate officers, it is managed by managers.
Similar to an LLC is a limited liability partnership. LLPs can also provide protection from creditors.
Partnership
A general partnership is simply two or more people getting together to run a business.
A limited partnership may be used when there are investors who are not involved in the business. These investors are the limited partners whose liability is also limited, while the liability of general partners is not.
Limited Liability Limited Partnerships
A relatively new twist on the limited partnership concept is the LLLP. Limiting liability is extended to the general partner of a properly registered LLLP. If you purport to do business as a Nevada registered LLLP without filing the necessary certificate of registration with the State, you could be subject to a penalty of $1,000 – $10,000.
Professional Entities
Under Nevada corporate law, those providing professional services, such as dentists, doctors, accountants, lawyers, etc., may practice under either a Nevada professional corporation (“PC”) or professional limited liability company (“PLLC”). There are limits on who can own these entities.
Business Trust
A Nevada business trust may be formed to operate any lawful business activity. Business trusts are not very common. They must be registered with the Nevada Secretary of State much like the formation of other business entities. Failure to file the proper certificate of trust with the State may result in penalties like the LLLP.
Other Factors to be aware of:
When considering a new business formation, you need to find out if a business already has the name you are considering. You can do this by performing a search on this page of the Nevada Secretary of State’s website. If the name already exists, the you’ll need to choose a different business name.
Every business organization, both domestic and foreign, must have a registered agent who can receive service of process on behalf of the entity. In addition, the annual renewal notices are sent to the registered agent.
The entity is also required to have a Nevada business license.
Knowing which business entity to use for your business out of the many different types can be confusing, to say the least. It’s important to recognize which requirements and documents need to be registered in Nevada to ensure that you take full advantage of the benefits of the entity you choose.
Receiving good counsel from an experienced CPA and attorney, working together, is essential. They can help you understand the regulatory environment that we are in.
For an initial consultation, please contact our office at (702) 894-4110.
