Frequently Asked Questions
- Which entity is best for me?
- What are state fees?
- How much stock do I need?
- Where do I get stock/membership certificates?
- Do I need a federal tax ID (EIN) number?
- How do I open my company bank account?
- When do I pay franchise taxes?
- Do I need to be registered to "transact business" in my home state?
- To safeguard personal assets against creditors and lawsuits. Without a Nevada LLC or corporation, owners' personal assets (houses, cars, bank accounts, etc.) are at risk of being seized any time the company is sued.
- Ownership in a Nevada LLC or corporation is private and easily transferable. The State of Nevada does not record owners' names, and there is no requirement to file or record the transfer of ownership.
- The Nevada Taxation Advantage.
- Nevada imposes no income tax on either LLCs or corporations.
- Nevada imposes no franchise tax, and minimal annual report fees.
- Nevada imposes a low franchise tax for small companies.
- Nevada imposes no tax on capital stock or assets.
- There are no Nevada capital shares or stock transfer taxes.
- There is no state inheritance tax on stock held by non-residents of Nevada.
- Health insurance and other fringe benefits. Nevada LLCs and corporations typically gain the ability to deduct the cost of health insurance and/or other fringe benefits.
- No limits on corporate losses. There are no limits on the amount of losses a corporation may carry forward to subsequent tax years.
- Ease in raising capital. Capital from investors can be raised easily through the sale of membership interests or corporate stock.
- Continuous existence. A Nevada LLC or corporation is capable of continuing indefinitely. Existence is not affected by the death of member(s)/manager(s), shareholder(s), director(s), or officer(s).
- Establish credit history. Regardless of your personal credit score, you can build a separate credit history for your Nevada LLC or corporation simply by applying for and using company credit.
LLC |
Corporation |
Corporation with S election |
|
Operational Requirements
|
Some formal requirements, but less formal than corporations.
|
Board of directors, annual meetings, and annual reporting are
required.
|
Board of directors, annual meetings, and annual reporting are
required.
|
Management |
Members have an operating agreement that outlines management.
|
Managed by the directors, who are elected by the shareholders.
|
Managed by the directors, who are elected by the shareholders.
|
Taxation |
If properly structured, there is no tax at the entity level.
Income/loss is passed through to the members. |
Taxed at the entity level. If dividends are distributed to
shareholders, dividends are also taxed at the individual level.
|
No tax at the entity level. Income/loss is passed through to
the shareholders.
|
Pass Through Income/Loss
|
Yes |
No |
Yes |
|
Double |
No |
Yes, if income is distributed to shareholders in the form of
dividends.
|
No |
Cost of Creation
|
$299 |
$299 |
$299 plus S corporation election add-on, $89
|
Raising Capital
|
Possible to sell interests, though subject to operating
restrictions.
|
Shares of stock are sold to raise capital.
|
Shares of stock are sold to raise capital.
|
|
Transferability |
Possibly depending on restrictions outlined in the operation
agreement.
|
Shares of stock are easily transferred. |
Yes, but must observe IRS regulations on who can own stock.
|
- What are limited liability companies (LLCs)? LLCs are essentially considered a combination of a corporation and a partnership, and have become increasingly popular in recent years. Similar to a corporation, an LLC has a legal existence separate from its owner(s), and the owners or member(s)/manager(s) are not personally liable for the company's debts and obligations. Like a partnership or an S corporation, an LLC is automatically treated as a pass through entity for tax purposes. Your LLC does not pay taxes; the LLC's income passes through to you personally and you are taxed on an individual basis. Key elements of a Nevada LLC include:
- Personal liability is limited for owner(s) to the amount of their investment in the company, similar to a corporation.
- A single-member Nevada LLC is automatically disregarded as an entity separate from its owners and includes all of its income and expenses on the owners' 1040 tax return.
- A Nevada LLC with two or more members is treated as a partnership.
- There is unmatched contractual flexibility with a Nevada LLC. Nevada law provides rules on matters where the members have failed to agree.
The management of a Nevada LLC is based
on an agreement between its owners, referred to as members. Nevada LLCs
allow a customized management structure. The Nevada LLC
statute allows parties to define their business relationship in the written
agreement however they wish. This is called "freedom of contract."
Nevada law provides rules only for those matters on which the parties have
failed to agree. The contractual flexibility offered by Nevada is unmatched
by any other LLC statute. For example, unlike a corporation, an LLC can
distribute profits in any manner described in the LLC agreement, regardless of
ownership share.
- What are corporations? A regular corporation, often referred to as a C corporation, pays taxes directly to the IRS. Key elements of a corporation include:
- The personal liability of owner(s) is limited to the amount of their investment in the company.
- No limit to the number or type of shareholders.
- Three tiers of power: shareholders, directors, and officers, all of which can be the same person.
- Shareholders own the company and elect the directors.
- Directors elect the officers.
- Officers manage the day-to-day operations.
- Minority shareholders are not responsible for the company.
- May operate based on a fiscal year, rather than a calendar year, as designated by the board of directors.
- Nevada requires no disclosure of corporate owners.
- Profits are taxed at corporate rates on an 1120 return, separate from the individual return.
- Profits are not automatically distributed to shareholders and can be kept as retained earnings.
- May deduct cost of fringe benefits to owner-employees.
- S corporation status can be elected if all qualifications are met.
One of the possible drawbacks of a regular corporation is that distribution of earnings as profits to shareholders are
taxed twice-once at the corporate level, and again at the individual
shareholder level if a dividend is declared. One way shareholders may be able to avoid double taxation is by filing for S corporation status. An S corporation is simply a corporation that has filed an election with the IRS allowing profits of the
corporation to pass through to the individual shareholders. Therefore, these
profits are taxed only once.
Keep in mind that you have up to 75 days after your corporation is formed to decide whether to make your corporation an S corporation for that year. The key elements of an S corporation are:
Keep in mind that you have up to 75 days after your corporation is formed to decide whether to make your corporation an S corporation for that year. The key elements of an S corporation are:
- The personal liability of owner(s) is limited to the amount of their investment in the company.
- Avoids double taxation, similar to an LLC.
- Profits and losses pass through to the individual 1040 tax return.
- Restricted to 100 shareholders or less.
- Shareholders must be US residents.
- Shareholders and directors must be individuals, not business entities.
- Operates on a calendar year, meaning the corporations books close on December 31.
Nevada corporations have three
tiers of power, the shareholder(s), director(s) and officer(s). Each of these groups
has different rights. NOTE: If you are a one-person corporation, you will be the
sole shareholder, director, and officer, fulfilling all three of the following
roles:
- Shareholders own the company, but don't necessarily manage the company.
- The directors take responsibility for the overall management of the company.
- The officers work for the board of directors and handle the day-to-day operations of the company.
- What is a registered agent? LLCs and corporations are required to appoint a registered agent located at a street address (post office boxes are not acceptable) during normal business hours. The registered agent is responsible for receiving important legal and tax documents on behalf of the company including Service of Process (notice of litigation), franchise tax forms and annual report forms. The registered agent's name and address are included on the formation documents, and as a result, this information is a matter of public record. There are a number of practical reasons for using a professional registered agent provider:
- No physical location in Nevada. You are legally required to have a registered agent with a physical address (no post office boxes) in the State of Nevada. Using a professional registered agent provider enables you to satisfy this requirement.
- Company transacts business in several states. When you qualify your company to transact business in states other than your state of formation, you need a registered agent in each of those states. By using a registered agent service provider, one company is handling this important function in each state, allowing you to concentrate on your business.
- Address changes frequently. It is important to keep the registered agent address updated with the state. Changing the address requires a formal state filing and also requires that a fee be paid to the state. Using a registered agent service provider ensures you will never have to worry about making the change with the state; you will only need to update your registered agent with your new address.
- Business is home-based. As previously mentioned, the registered agent address is a matter of public record. That means anyone, including marketers, can access the address. It is not uncommon for the registered agent to receive junk mail on behalf of the business. Using a registered agent provider can reduce the amount of unsolicited mail your business receives.
- Ensure business privacy. Service of Process is often delivered by local law enforcement. Most business owners do not want customers, employees or neighbors (as in the case of home-based businesses) to witness law enforcement serving them a lawsuit. Using a professional registered agent ensures you receive Service of Process discreetly.
- Lack of normal business hours or permanent worksite. The registered agent for a business must be available during normal business hours to accept important documents as they are delivered. If you set your own hours or your business requires you to move around frequently (for example, an electrician who is making service calls all day), you may wish to consider using a professional provider. The registered agent service provider ensures that you never miss these important communications and that these documents reach you and your business.
- Informs you of key compliance issues related to your company. A professional registered agent service provider is an excellent way to ensure your LLC or corporation is aware of any upcoming compliance events that may affect your company's standing with the state.
The first 6 months of registered agent service is included in The Nevada Company's complete formation package. You will be billed $167 annually for the service after the first 6 months. You can save $68 when placing your order by purchasing the registered agent renewal add-on, which allows you to renew your company's second term of service for only $99.
- Can non-US business individuals form in the US?
If a company intends on selling services throughout the US, it may be necessary to form in the US.
There are no legal mandates imposed on non-US businesses regarding their ability to transact business in the US or as to the entity type they are required to form. Many non-US businesses choose to form LLCs due to the fact that there are no limitations on the number of investors or the investors' citizenship (unlike S corporations). While LLCs tend to be a very popular choice for non-US businesses, many also form as regular corporations. Regular corporations (C corporations) contribute to the ease in gaining investors and also allow companies to go public in the future.
Many non-US business owners select The Nevada Company to assist with their formation needs because we specialize in filing the necessary paperwork to form LLCs and corporations in the state of Nevada. If you wish to open a Non-US bank account, please note that you may wish to add an Apostillized Certified Copy of the Articles of Organization when you place your order. Also, please note that due to the implications of international shipping, these packages may incur additional shipping charges and may take longer to receive.
Free Nevada Name Check:
Check the availability of your LLC or corporate name with the State of Nevada. If the name is available, place your order online to receive your kit within 24 hours.
