Benefits of Incorporating
The main advantage to forming a Corporation or LLC is to protect the
personal assets of the owners from debts incurred by the business. By
forming a Sole Proprietorship or a General Partnership you are leaving
yourself and your assets vulnerable if your business incurs a debt which
it is unable to repay. By forming a Corporation or LLC you are
essentially forming a seperate legal entity which has it's own credit
file and will live on beyond the life of the original owners.
While a Sole Proprietorship and a General-Partnership have a few tax and
fringe benefits, these benefits hardly compare with those associated
with a Corporation or LLC.
Another point worth considering when forming a business is the audit
rate, which is high with a Sole Proprietorship and a General
Partnership. Corporations and LLC's with a net profit less than $400,000
have a low audit rate.
Benefits of LLC's
Asset Protection
No Double Taxation
Tax Benefits
Seperate Credit File
Low Audit Rate if under $400,000 profit
Easy to Raise Capital
Perpetual Duration of Existence in most states
Benefits of C-Corporations
Asset Protection
Unlimited Sale of Stock
Ease of Transfer
Lower Cost to Form than LLC (in most states)
Tax Benefits
Seperate Credit File
Low Audit Rate if under $400,000 profit
Easy to Raise Capital
Perpetual Duration of Existence
Benefits of S-Corporations
Asset Protection
No Double Taxation
Reduced Taxable Gains
Write Off Startup Losses
Seperate Credit File
Low Audit Rate if under $400,000 profit
Easy to Raise Capital
Perpetual Duration of Existence
Nevada Corporation Information
A corporation is formed by filing Articles of Incorporation with the
Secretary of State. The State of Nevada when it accepts the Articles
issues a Corporate Charter. Once the corporation is chartered, it may
then go about the business of getting itself organized. Most of the
corporations we file are general corporations. The Articles of
Incorporation must contain the name and address of at least one
director. We also have aged, or shelf corporations for those situations
which require an already established entity.
If you do not want your name to appear anywhere on the public record,
you can choose our nominee services for privacy. Call us for details.
One of our nominee agents will be listed as the director and all
officers for public record. The Articles of Incorporation we file
provide indemnification and protections you won't find with most
incorporation agencies.
Types of Corporations
General Corporation
Regulated by NRS78 a general corporation is the most common type of
business entity. A corporation is owned by stockholders. A stockholder's
personal liability is limited to the amount of their investment. The
corporation's existence is eternal as long as it is in good standing
within the jurisdiction that it exists. This is the entity that the
great majority of clients form. The disadvantage mentioned by those not
familiar with corporate strategies of a "C" corporation is the
possibility of being taxed twice. Once at a corporate level, and once
again at the individual rate, if the Corporation pays the individual by
issuing a dividend. However, if dividends are not declared, there is no
double taxation problem. The advantages to this entity are explained in
great length in many books and there are many, many advantages to doing
business corporately.
The board of directors are responsible for managing the affairs of the
corporation. Usually, directors make only the major business decisions
and supervise and appoint the officers who make the day-to-day business
decisions of the corporation. Officers are responsible for the everyday
management of the corporation. Typically, officers are appointed
directly by the board of directors. It is important to note that a
shareholder may serve on the board of directors and as an officer. In
fact in Nevada one person is enough to form a corporation.
Your corporate expenses may include automobiles, planes, home offices
and equipment,cellular phones, business travel, business meals, medical,
dental, and optical benefits, tax deferred retirement plans for the
officers of the corporation are all among the many legitimate pre-tax
expenses allowed corporations. As long as the Corporation has the same
benefit policy for all of it's employees, even if it's just mom and pop,
the pretax benefit package may more than pay for the cost and time
involved taking care of business corporately rather than individually.
Close Corporation:
Regulated by NRS 78a a "Close" corporation is a variation on the General
Corporation, where the stockholders, directors and officers are
typically the same people, and where they desire to remain a small
tight-knit group, without a formal board of directors involved in the
decision making process. There are Close Corporations structured to
eliminate the board of directors which gives the stockholders the right
to run the company directly and all responsibilities that the board has
in a General corporation.
Meant for the small, tight-knit group
Restricted to no more than 30 stockholders- Cannot "Go public"
Eliminates a Board of Directors
Stockholders take on the directors' responsibilities
Stockholders manage the company directly
Restrictions on the sale or transfer of stock
Corporation may be run like a partnership with all corporate benefits
Provisional director may be appointed to settle disputes
Can be Subchapter S if all qualifications met.
S Corporation
A form of corporation, allowed by the IRS for most companies with 75 or
fewer shareholders, which enables the company to enjoy some benefits of
incorporation but be taxed as if it were a partnership is called a
Subchapter S Corporation.
Nevada corporations can elect to make a Subchapter "S" Election . It is
authorized by the IRS to permit a corporation having fewer than 75
shareholders to "pass through" its profits directly to the shareholders
without a corporate tax. This permits the small corporation to offer its
shareholders limited liability while enjoying the tax advantages of a
partnership. All shareholders must sign the IRS Form 2553 Election. You
should consult an accountant before making the Subchapter S election
because it may increase your personal taxes more than offsetting the
savings in corporate taxes. The form must be filed within 75 days from
the date of your incorporation. While it can save the shareholders money
by avoiding federal corporate taxes, if they were to be paid dividends,
the Subchapter S election does pass through all profits to the
shareholders whether or not any dividends are paid to them. Subchapter S
corporation shareholders have to report all premiums paid on their
behalf as taxable income whereas officers
of a "C" corporation do not.
Compare LLC Vs S Corp.
Regulated by NRS 86
Articles of incorporation for a C corporation are known as articles of
organization for an LLC. The bylaws of a C corporation have their
equivalent in the operating agreement of an LLC (neither of which is
filed with the Secretary of State as a matter of public record). An LLC
may be run by a manager or managers, equivalent to a C corporation’s
director(s). Alternatively, it may be run by its members, which would
make it most similar to an S corporation (a C corporation that elects S
corporation status), allowing for profits to flow through to the
members. The LLC, when run by a manager, can have it's members taxed as
a limited partnership under the proper operation. The LLC also has
"charging order" protection rather than being subject to judgments as a
corporation or individual is.
In many ways the LLC , which has only been around for twenty plus years,
has been an awkward corporate form and we have seen little to no
advantage in going with an LLC over a C corporation. In some cases where
two or more corporations might work together on a specific project of a
limited duration, an LLC has been used basically as the agreement
between the cooperating parties-but why not just have an agreement? As a
consequence, we have been involved in the establishment of many
corporations fewer LLCs, up ’until recently. SB 51 passed unanimously
effective October 1, 2001 changes the strategies available for LLC's.
Our link to the complete bill will show the changes made before final
passage, and the intent of the Legislature. We think you'll agree the
business environment in Nevada is favorable by legislative design
contrary to repressive legislation in some other jurisdictions. Here are
links to other state corporate laws.
Nevada wants your business!