Continue reading »]]> Corporations have different legal advantages as well. Here are some to consider if you are going to incorporate in Nevada.

• Simple Corporate revival procedures.
• Efficient, predictable Business Court minimizes the costs and risks of business litigation.
• Amendments may be filed with delayed effective dates.
• Entities formed in other states may be converted into Nevada entities so they can have the same advantages and flexibility.
• Piercing the corporate veil in Nevada requires the presence of “fraud” or “manifest injustice”.  This is the highest standard for personal indemnification available.
• Charging order protection for stock of closely-held corporations protects stockholders of all Nevada corporations with between 2 and 75 shareholders.  Nevada is the first – and only – state to offer this level of shareholder protection!
• Nevada’s charging order protection statute protects S corporations from losing their federal S election in the event of a judgment against a shareholder.  This prevents potentially significant negative tax consequences.
• Corporate directors have greater flexibility in consenting to corporate actions
• Reinstatement of entities has the legal impact as if the corporation had always been in good standing, thus preserving the corporate veil.
• Dissenting shareholders prohibited from voting shares or receiving dividends in certain circumstances.
• Stock transfer agents are required to be licensed, ensuring high ethical standards.
• A corporation may elect to renounce specific business opportunities.
• Articles of incorporation may require more than a plurality of votes cast by stockholders in order to elect directors, if desired.
• Restated articles of incorporation do not need an accompanying resolution upon filing.
• Corporate revival procedures are simple.
• Efficient, predictable Business Court minimizes the costs and risks of business litigation.
• Amendments may be filed with delayed effective dates.
• Entities formed in other states may be converted into Nevada entities so they can have the same advantages and flexibility.

Continue reading »]]> Should you operate your business as a corporation? Or is there another, simpler alternative? You’ve probably noticed that in the past decade there are more and more businesses with their names followed by the letters “LLC” instead of “Inc.”. “LLC” stands for Limited Liability Company, is the newest type of legal entity that exists in the United States, and for many entrepreneurs it is the ideal marriage between the tax advantages of the limited partnership and the limited liability feature of the corporation. Now available in all 50 states—even to non-U.S. citizens–most likely the LLC should have a key place in your business structure.

When it comes to legal entities for conducting business, limited liability companies are the newest kid on the block in the United States. The state of Wyoming was the first to pass legislation, in 1977, to establish this new entity. By 1999 all fifty states in the United States had enacted legislation to allow the formation of this exciting new legal entity.

But why is the LLC so attractive, so irresistible to legislators? And why have so many entrepreneurs opted for the LLC instead of a “C” corporation, or even an “S” corporation? And most important, how do you decide if it’s right for you?

Perhaps the most important reason is for the popularity of the LLC that the it satisfies the demands of both accountants and attorneys. Accountants tend to prefer the Limited Partnership (“LP”) because they are concerned about the dangers of “double taxation” if their clients use a corporation: If your corporation pays dividends, the corporation pays taxes on its profits, and its shareholders pay taxes again on those same profits when they are taxed on the dividends they receive. By contrast, attorneys usually prefer the greater asset protection offered by the limited liability that the corporation has to offer to all its owners.

Let’s begin with an understanding of what the limited liability company is. Basically it is a partnership among its owners, who are called “members”. The LLC is like a limited partnership (and an S-corporation), because it is a “pass-through entity”–each partner’s or member’s share of the net gain or loss for the year “flows through” to the individual tax-payer’s 1040 individual tax return. There is no separate tax to which the LLC itself is subject. On the other hand, the LLC is also like a corporation, because unlike the limited partnership–which requires a general partner, who is responsible for all results of all decisions and actions of the partners–all its owners benefit from limited liability.

People choose to form LLCs basically for the same reasons that they would elect to set up an S-corporation or a limited partnership. The LLC, like the S-corporation, is attractive if you have earned income that puts you in a high tax bracket, and you would like to be able to offset that income with the losses that you can normally expect to incur in your first years in a business. When I formed my first business entity twenty years ago, my husband and I selected the S-corporation. We both had salary income that placed us in a high tax bracket, and we knew that our new consulting business would incur significant capital expenses in the first few years. After all, we would have to purchase new equipment such as a fax machine, a laser printer, personal computers, and the replaceable supplies to operate them. We were also aware that it would take some time to build a clientele, so our income from the business would take a few years to take off. The S-corporation allowed us to carry the losses we incurred onto our individual 1040 tax returns. The losses were deducted from our gross personal salary income, and we paid dramatically lower taxes.

If you can get this advantage from an S-corporation, why would you bother with an LLC? The LLC has a number of advantages over the S-corporation:

1. First, the LLC does not have the limitations that the S-corporation has on who can be a member of the LLC. Only individuals, estates, some trusts, and other S-corporations can be members of an S-corporation. Individuals (shareholders) must be either U.S. citizens or residents. By contrast, the LLC is not subject to these limitations. Thus, it is an ideal entity that you can combine with other entities in your business structure. For example, you can have a corporation or other legal entity be a member of an LLC.

2. The LLC has much greater flexibility for allocation of rights, profits, and assets than the S-corporation. The S-corporation can have only one class of stock: In other words each share of stock has the same rights as every other share. This means that the allocation of profits and assets is extremely rigid. If Parties A and B are equal shareholders in a corporation, and the corporation decides to distribute its profits of $10,000, then A and B must each receive $5,000. This might not necessarily be equitable if one partner was much more active and produced a much greater share of the profits than the other. The LLC allows for A to receive, say, $8,000 if its business activities generated 80% of the profit, leaving B with the remaining 20%, or $2,000. This can be very attractive in a partnership in which there is a significant difference in the amount of capital and ongoing business activity that the partners are contributing to the business.

3. The LLC is not subject to the same corporate formalities that are required of the S or C corporation. While the LLC must still maintain appropriate LLC records and bookkeeping, it is not required to be managed by a board of directors and maintain minutes of regular board of directors meetings.

4. Unlike the S-corporation, liquidation of an LLC is generally not a taxable event. As your personal and business financial situation change over time, you may determine that it is no longer in your interest to maintain a “pass through” entity for your business. Once your business begins to turn a regular profit after the relatively high costs of the first year or two, you may decide that a C-corporation that is taxed at a maximum of 25% (unless it is a personal service corporation) would be more advantageous to you. If you have been operating as an S-corporation and you liquidate it by selling the liquidated assets to the shareholder(s) at their fair market value, the liquidation will be a taxable event. This does not apply to the LLC. This is one of the factors that makes the LLC particularly attractive for holding real estate.

5. The concept of the charging order makes the LLC especially effective for asset protection. This makes it a particularly attractive entity for holding real estate. The corporation should not be used to hold real estate, because if the corporation is sued, the court might award shares in the corporation in the judgment. Control of the corporation translates into control of the property, and you effectively lose control over your real estate holdings. By contrast, the charging order, used with Limited Liability Companies as with Limited Partnerships, gives the plaintiff only the right to receive income distributions from the interest of the party or parties against whom the suit was brought. The charging order grants no voting rights or management powers. Thus, the existing managers or members could vote simply not to distribute income, thus leaving the plaintiff with no recourse; yet the plaintiff will have to pay taxes on the income allocated to her, even though the funds were not distributed(!). This offers a strong incentive for the plaintiff to negotiate for a settlement.

Clearly, the LLC is a powerful tool for protecting your assets against financial predators. If you use it for real estate holdings, you can maximize this protection by holding each piece of real estate in a separate LLC. Thus, if one LLC comes under attack from financial predators, the operations affecting only a single property will be affected.

Disadvantages of the Limited Liability Company

Needless to say, there are some disadvantages with the LLC–otherwise there would not be remain so many other attractive options for structuring your business. Why might the LLC not be the best option for you?

1. Increased taxes for LLC members in high tax brackets. Once your LLC is making a profit, its income passes through the individual members, who are taxed directly on that income, whether it is actually taken out of the LLC or not. Thus, members who are in a high tax bracket might pay higher taxes than they would if they used a C-corporation, which is subject to lower marginal tax rates. Proper planning of disbursements for expenses and other aspects of the business could overcome this disadvantage.

2. Higher initial filing fees for LLCs in some states. Some states may levy heavier tax obligations on LLCs in their initial years.  It can still be worthwhile for you to start an LLC: If you have high start up costs, tax savings in the thousands of dollars will outweigh these higher filing fees.

3. Unlike corporations, LLCs do not have continuity of life, that is they are limited usually to a specific period of time (say, 50 years) depending on the state. If an LLC member dies, the remaining members may vote to continue the LLC business. LLC interests can be gifted to other family members; and the LLC can have a trust or family limited partnership as a member, thus providing for effective estate planning.

4. The LLC is a relatively untested entity. There is the large body of case law on corporations but on LLCs. We may also expect to see changes in the laws governing LLCs as the implications of this new entity become more apparent to legislators.

Continue reading »]]> Requirements for Incorporating in Nevada.

One of the main points in forming an LLC, or “limited liability company,” is that you establish your business as a legal entity separate from yourself. This separation protects both your personal assets and your personal credit status in the event that some liability is incurred, or you encounter financial difficulties that force the business to close. If you have ever looked into what is required to incorporate either online or otherwise, you’re probably aware that some states are considered “corporate havens.” Those who incorporate business in states such as Delaware or Nevada enjoy certain protections and advantages not available elsewhere; there are good reasons to form an LLC in Nevada.

Every state has requirements and procedures to form a corporation, and Nevada is no exception. If it is your intention to incorporate in Nevada, you’ll need to know the process.

Getting Started

It may seem obvious, but in order to form an entity of any kind in Nevada, first you need to choose a name for your business. If you are using your personal name, you’ll need to add “Inc.”, “Co.” or “Ltd.” Etc…, in order to make it clear that it is in fact a business and not a natural person. In addition, certain types of businesses must be approved by the state before incorporating in Nevada. This pertains specifically to financial services, engineering firms and insurance carriers.

Articles of Incorporation

In order to form an entity in the state of Nevada, you must document the fact that you are of legal age (18 or older), include the location of your primary residence, and certify that you are in fact the director, manager, member, or partner. If there are other individuals, the same information must be filed when you incorporate a business in Nevada.

While it is not necessary, in order to form a corporation in Nevada as a C-Corp or S-Corp and will be selling stock in the company, the Articles of Incorporation must include information on the type and amount of stock that will be issued.

Registered Agent

Every state requires a corporation to have a “registerd agent.” This person is someone who actually resides in the state of Nevada, who is authorized to receive correspondence from state agencies.

Once You Are Up and Running

Incorporating in Nevada is relatively simple as long as standard set procedures are followed.

Once you form your entity in Nevada, you’ll need to furnish an initial list of officers and directors, even if that is you alone, as well as that of your resident agent. This information pertaining to your Nevada entity will need to be updated every year.

In addition, if you are planning to conduct business inside the state of Nevada and you reside elsewhere, you may need to register in your home state as a “foreign” or out-of-state entity. It’s a bit of trouble, but the protections and tax benefits you’ll enjoy when you form a Nevada entity definitely make it worthwhile.

Continue reading »]]> Nevada is an exceptionally business-friendly environment to form your business in. Here are some of the reasons why you should consider incorporating your business in Nevada:

• Stockholders, directors and officers are not required to be residents of Nevada.
• Stockholders, directors, and officers are not required to be U.S. citizens.
• Stockholders are not required to be Directors.
• Nevada corporations may purchase, hold, sell or transfer shares of their own stock.
• In Nevada, one person can hold all positions in a corporation or Nevada LLC.
• No cash restrictions. In Nevada, you can issue stock for cash, property or services at the complete discretion of the board of directors, which again, can be just yourself.
• Relocation is not necessary. Officers of a corporation can live anywhere in the world. Your directors and shareholders can hold meetings anywhere. Your corporation or Nevada LLC can also be formed easily by mail, fax or phone 1-775-882-1013so you can incorporate in Nevada, or form a Nevada LLC without ever seeing the state.

Nevada LLC or Nevada Corporation Tax Savings and Policies:

• No Corporate Tax
• No Personal Income Tax
• No Franchise Tax on Income
• No Inheritance or Gift Tax
• No Admissions Tax
• No Unitary Tax

Continue reading »]]> Top Five Reasons to Incorporate in Nevada

1)      The Corporate Veil

Nevada protects the corporate veil like no other state. As a comparison, over the last twenty four years, the corporate veil has been pierced in Nevada only twice, while in California, it has happened to fully half of all corporations.

How does Nevada protect you? Unlike a sole proprietorship, in which you are personally responsible for all debts and obligations incurred by your business, a corporation in Nevada is a nearly impenetrable entity as far as creditors are concerned. More so than any other state, Delaware arguably being the second best, Nevada will not only protect you but also the board of directors.

What does it mean to “Pierce the Corporate Veil”? There are three major requirements in Nevada for a corporation necessary to differentiate itself as a separate legal entity from an individual or sole proprietorship. First of all, all of the formalities must be observed by the corporation. Instead of an individual making decisions for a company, a corporation must use written minutes and resolutions as the decision making process. This provides for a paper trail that the courts can refer to regarding any business decision or practice. Second, in no way can business funds be used for personal items. Finally, the corporation must have proper capitalization.

Should any of these three items not be followed, a judge may decide that the corporation is not, in fact, a separate legal entity. Thus, once the corporate veil has been pierced, the courts will view your company as, technically, a sole proprietorship, making you liable for all debts, obligations, and other responsibilities.

2)      No State or Corporate Franchise Taxes.

As long as your company has at least one employee in the state of Nevada,  there are no State or Corporate Franchise taxes.

3)      A Single Individual Can Hold ALL of the Corporate Positions in Nevada

Although many other states require at least three different officers or directors, Nevada will allow one person to hold the offices of the three major positions: President, Secretary, and Treasurer.

4)      The Only Requirement in Nevada to Form a Corporation is a Legal Purpose

In many states, including California, Indiana, Iowa, Louisiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Pennsylvania, Rhode Island, Texas, and Virginia, the state requires a corporation to have a “business purpose” in order to form an LLC (Limited Liability Company). This requirement thus limits the LLC from holding an asset to protect it from a creditor, unless the state deems that the LLC falls into one of their business purpose categories. In Nevada (along with some other states), an LLC can be formed for “any lawful purpose”, and that LLC can then hold personal assets without having to perform any business without effecting business license statutes.

5)      Nevada Has Low Filing Fees

$125 for listing and $200 for business license fees.

Continue reading »]]> Tax Advantages to forming an S-Corporation.

In any S-Corporation, only the earnings actually paid out to an owner as compensation for services are subject to payroll taxes. Any money left in the business for reinvestment or distributed to the shareholder as a dividend is not subject to payroll taxes…and not subject to self-employment tax.

S-Corporation Defined.

An S corporation, for United States federal income tax purposes, is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code.

In general, S Corporations do not pay any income taxes. Instead, the corporation’s income or losses are divided among and passed through to its shareholders. The shareholders must then report the income or loss on their own individual income tax returns. This concept is called single taxation; if the corporation is taxed as a C Corporation, it will face double taxation, meaning both the corporation’s profits, and the shareholders’ dividends, will be taxed.

Who typically elects S-Corporation status?

Most entrepreneurs prefer the S-Corporation structure for the following reasons:

• The S-Corporation combines many of the advantages of the sole proprietorship, the partnership, the corporation, and the LLC into one entity.
• Unlike sole proprietors and partners in a partnership, shareholders of an S-Corporation are afforded the same level of limited liability and personal asset protection as are the shareholders of a general, for-profit corporation.
• In an S-Corporation, shareholders avoid the “double-taxation” common to shareholders of non-S-Corporations because all income or loss in an S-Corporation is reported only one time on the personal income tax returns of the S-Corporation’s shareholders.

Where a corporation claims income from a passive investment (e.g. from real estate owned) for three consecutive years that exceeds 25% of the corporation’s gross receipts, S-Corporation status may be terminated by the IRS. Many real estate investors prefer placing real property in an LLC (Limited Liability Company) rather than an S-Corporation for this reason.

What Requirements to Qualify as an S-Corporation exist?

To qualify for S-Corporation status, the corporation must

• Be filed as a U.S. corporation.
• Maintain only one class of stock.
• Maintain a maximum of 100 shareholders.
• Be comprised SOLELY of shareholders who are individuals, estates or certain qualified trusts, who consent in writing to the S-Corporation election.
• NOT have a shareholder who is a non-resident alien.

Note: Failure to observe ANY of the above requirements could revoke S-Corporation status at any time.

What are the differences between an S Corporation and an LLC?

While on the surface the S-Corporation and the Limited Liability Company (“LLC”) may seem similar, but please note the following very significant distinctions. The following are some of the differences between the two types of corporate entities:

• S-Corporations are limited to 100 shareholders.
• LLCs have no limit to the number of members.
• S-Corporation shareholders must ALL be individuals who are U.S. citizens or permanent resident aliens.
• LLC members (owners) may be individuals, corporations, partnerships, many trusts, and even non-resident aliens.

The “S-Corporation” Deadline:

To qualify as an “S-Corporation” for the 2008 tax year, a “calendar year” corporation must timely file IRS Form 2553 with the IRS.

If a corporation was in existence in 2007 or earlier, then this filing must be submitted to the IRS on or before: March 17, 2008

If the corporation is a “New Corporation” (formed on or after 1/1/2008), then the S-Corporation election may be submitted at anytime during its tax year so long as the filing is made no later than 75 days after the corporation has begun any of the following activities (whichever is earliest):

• Conducted business as a corporation
• Acquired assets, or
• Issued stock to shareholders

For existing corporations, the form must be submitted to the IRS by March 17th. If you are filing for a new corporation, you must submit this form within 75 days of when your corporation first acquires assets, begins conducting business or issues shares to its shareholders.

Important: As with any important legal matter, you are strongly urged to contact a licensed professional before making any decisions that could impact your tax liability. Please Contact Us for advice as to whether your corporation will qualify for S-Corporation status.

Continue reading »]]> Limited Liability Companies (LLCs) have been featured prominently in the news for the last few years, and with good reason. Why is this? Whereas traditional companies have some short-comings for the business owner, LLCs offer a solution that is appropriate for many.

One way to define an LLC is as a merger of the partnership and the corporation, except it has the all of the beneficial qualities of each and few or none of the less favorable aspects. It offers full limited-liability protection to all the owners (like the corporation), yet has a pass-through tax status (like the partnership). In addition, the LLC has a second layer of liability protection that shields the business from any personal lawsuits that may befall you.

LLCs are relatively new entities. Subsequently, there are details about the LLC that need some further explanation for many. Even the seasoned business owner with a working knowledge of corporations and companies often require some assistance in deciding if an LLC is the right answer.

Probably the easiest method to understand the concept of a LLC is to consider it as a regular partnership, with the exception of the fact that all of the partners have limited-liability protection. With this safeguard, the partners (also known as “members”) of the LLC are not personally liable for debts incurred or actions taken by the corporation. Next, as LLCs have to be formed with the state, and this lends them an “official” consideration. Finally, LLCs allow for the company to raise capital by selling off pieces of the company in the form of membership interests. But when all is said and done, LLCs were made to be easy. They are easy to understand and easy to run. Not to mention, if you make a mistake, the consequences aren’t as dire as they would be with a corporation.

LLCs, like most entities, are subject to state oversight. The problem with this is that not all states treat LLCs in the same manner; Thus, you will need to do a little bit of research to make sure you’re complying with the laws of the states you are transacting business in. For more information or if you have any questions about LLCs in the State of Nevada, please feel free to contact us.

Although in most states, more LLCs are being formed now than corporations, they are still a very new entity. Compared to corporations, which have hundreds of years of case law backing them up, courts still have a lot to decide about LLCs. When operating an LLC, know that some things are based upon assumptions rather than actual legal precedents, and this creates gray areas — and potential problems. After all, you don’t want to be the unlucky guy stuck in the courtroom when everything you thought you knew about LLCs is overturned. The best way to avoid this is to have a great registered agent who stays abreast of LLC laws for you. Should any monumental shifts occur in how LLCs are treated, we can fill you in so you can plan accordingly.

Continue reading »]]> Regarding the Nevada Business License Fee

Frequently Asked Questions

What is the State Business License and who is required to file?

State law requires that every person or entity doing business in the State of Nevada obtain a business license annually. A business that meets the criteria shall not do business in the state of Nevada without the State Business License. Certain businesses may be exempt from the state business license requirement.

What is the cost of a State Business License and when is it due?

The State Business License Fee is $200 and must be renewed annually.Check, debit card, e-check, trust account, credit card and cash (only in-person) are accepted forms of payment.

How do I obtain/apply for a State Business License?

Effective October 1, 2009 a business must apply for the State Business License with the Office of the Secretary of State.online at www.nvsos.gov, by mail or in-person. online at www.nvsos.gov , by mail, or in-person.

Will a List of Officers or a Business License Application be rejected if not accompanied by the fees?

For entities that are formed under NRS Title 7, the business license fee is due at the time an Initial List of Officers or Annual List of Officers is due. The State Business License Fee is in addition to the fees for the initial or annual list.

For Non-Title 7 businesses (NT7) such as sole proprietors and partnerships, the business license application is required as soon as you begin to conduct business in Nevada.

For Title 7 entities, the application for a business license is part of the Initial List or Annual List of Officers filing and can be filed.

Continue reading »]]> State Agent and Transfer is located in the heart of downtown Carson City.  We are proud of our community and would love to share it with you!

Before you visit us, take a look at www.ccdowntown.com .  This website will provide you with our local Carson City restaurants and entertainment.

Carson City Chamber of Commerce:

www.carsoncitychamber.com

Visiting Reno or Tahoe?

We are just 45 minutes from Reno. A short drive from the Biggest Little City in the World and a 45 minute drive to South Lake Tahoe. Northern Nevada has much to offer for entertainment, excitement and fun.

Reno Chamber of Commerce:

www.renosparkschamber.org

South Lake Tahoe Chamber of Commerce:

www.tahoechamber.org

Take a look!  We love it here!