A corporation is an artificial legal entity made up of a number of natural persons or other legal entities, that has a separate legal identity from them with certain legal rights and duties (e.g., the right to sue, etc.). In addition to having a separate legal identity, the modern business corporation has three other legal characteristics:
1) transferrable shares; 2) perpetual life, and; 3) limited liability. Legally, limited liability is undoubtedly the most important benefit. Aside from a few exceptions (i.e, fraud, etc.), a corporation generally shields the personal assets of the owners and officers of the corporation from the debts/actions of the corporation.
In addition, the tax laws provided certain benefits to corporations that were not available to any other businesses froms (e.g., group health insurance benefits,
etc.). However, in 1997 the tax rules were changed to allow unincorporated business, such as LLCs, to elect whether to be taxed as a corporation or a pass-through entity (partnership or sole proprietorship).
There are other reasons to choose a corporation: large body of case law and statutory framework; corporate structure, and; perception (having "inc." next to your business name).
A properly formed corporation consists of:
1) Articles of
Incorporation - filed with the State 2) Bylaws - the main organizational document that sets forth the powers of the Shareholders, Officers and Directors. 3) Written Consent in Lieu of Organizational Meeting -
What is an LLC?
Limited Liability Companies - or LLCs - haven't been around long but have managed in a relatively short period of time to become the entity of choice for most businesses.
In organizational structure, they are similar to partnerships. Instead of "partners", the principals of an LLC are called "members". Instead of partership agreements, an LLC has an "Operating Agreement". Also, for tax purposes, unless the members choose otherwise, an LLC is treated like a partnership by the Federal (IRS) and State taxing authorities
However, an LLC is more like a corporation when comes to personal liability protection. Like a corporation,
the members and managers of an LLC are protected from personal liability for the debts/actions of the company. Also, an LLC, like a corporation, is also a "creature of State statute" and therefore is regulated by the State government, which typically requires certain public disclosures and filings.
Management wise, an LLC can be managed by its member(s) or by its manager(s). A manager does not have to be a member of the company.
Why Choose an
LLC?
Limited Liability Companies are low cost, low maintenance and very flexible. Unlike corporations that require annual filings and annual meetings, once you set up an LLC you are done - nothing more is required! Tax and management flexibility also make LLCs very attractive. LLCs can be taxed and managed like a partnership or like a corporation. Finally, LLCs are realtively inexpensive to set up and maintain. For these reasons, LLCs are generally the most
popular business entity used today.
The Advantages of Using a Nevada LLC/Corp?
Nevada companies offer three advantages: 1) No State income tax. If your business is actually domiciled in Nevada, you would be able to take advantage of Nevada tax laws;2) the owners of the company can remain anonymous, and; 3) Speedy approval process - Nevada companies can be filed and approved by the State of Nevada in as little as 2 hours!!
Which Entity Offers the Best Tax Advantages?
Though an LLC offers the most flexibility, this is a question only your accountant or tax attorney can aswer for you.
