Everyday Errors Are Dangerous When Filing Nevada Corporations & LLC's

C Nevada does at least 60,000 new entities a year. The reason for this is that Nevada has no personal income tax, and Nevada offers the strongest corporate veil of all states (A corporate veil is what protects an entity from a law suit.), providing the corporation has integrity and is funded. Of course, other states don’t like the idea of losing business to Nevada. Not that businesses matters to them, but the loss of revenues certainly does.

C To properly file a business entity in Nevada, it ought to be filed correctly. If not, upon an Internal Revenue audit, one might have questions concerning legality and proper tax deductions to answer. The same is true when individual states require an audit of Nevada Corporations or LLC’s. To avoid these issues, here at NBI we have the expertise and experience in incorporating Nevada LLC's and Nevada Corporations.

C LLC’s can have different tax advantages with the IRS. For example, it is commonly but incorrectly understood, that profits from an LLC pass through to the client’s personal income tax. Incorrectly, because an LLC must apply for "S" status with the IRS before the profits are not taxed twice (within 75 days of the state registration date). However, hoards of companies aren’t telling their clients to get S status for their LLC’s, and by the time a CPA tells them, it’s usually too late.

C To avoid or pass an audit, that is, for tax write-offs involving Nevada Corporations or LLC’s, everything must be documented properly. More examples of Registered Agents not informing their clients of company procedure is the everyday errors of Nevada companies not having an active employee (actually being based in Nevada); not issuing stock; not having a rent, telephone or power receipt. Coupled, or singularly, these raise eyebrows at a tax audit.

C  Nevada Corporations and LLC’s are formed under the jurisdiction of Nevada Statutes in Nevada, and may have issued or un-issued stock (unwise). Issued stock always translates into ownership-proof for shareholders, and should always be backed by some form of value (CPA’s are normally required to set up stock funded accounts.).

C Typically, Nevada Corporations are managed by a board of directors (One person may be all officers of a corporation), which is another way of saying, a board of officers. Officer designations are normally titled Secretary, Treasurer, Vice President and President. To name more officers is to designate them as Directors. Of course, a single Director can control and own a corporation without being a designated named officer. Thus, ownership-position and bottom line authority in a corporation are determined by one's ownership of stock, not one’s title.

C  Nevada LLC’s, or better known as Nevada Limited Liability Companies, either have members and/or managers, or both, as opposed to directors and officers of that of a corporation. A Nevada LLC may be managed by one or more managers, or by one or more members, or both in Nevada. Ownership of Nevada LLC’s typically are so because of issued Membership Certificates (a form of non public stock), which are to be logged, issued, funded and recorded in something called an Operations Agreement. Operation Agreements set the guidelines of how to operate a Limited Liability Companies amongst its manager(s) and/or member(s).

C  Forming a Nevada Corporation or LLC is the first step for informed people and business proprietors to protect their assets; that is, if they choose Nevada. The benefits of forming a corporate entity are varied and many. Oftentimes the benefits of any corporate entity far outweigh the benefits of a sole proprietorship.

C  Now Nevada Corporations and LLC's provide unique liability protection, whereas failing to incorporate provides no liability protection whatsoever. As already mentioned, Nevada provides the strongest corporate veil of all the states, and has never been pierced. In the liability protection afforded Nevada Corporations and LLC's, creditors can't pursue an officer or member/manager's personal assets for business indebtedness.

C  Consider, then, that corporate entities have tax favorable savings compared to that of being a proprietorship: self-employment taxes; life insurance; owner-officer health insurance premiums; corporate improvements on personal property for reason of corporate image, and many more. The Nevada Corporation Handbook, sold at Amazon.com, is a great reference to the do's and don'ts of corporate entities, and a guide to proper deductions.

C  Unlike the profit of C corporations, the profit-income of S corporations and LLC’s are passed-through to the individual and reported on the individual's personal income tax return, instead of being taxed first before the profits are divided. For the record, there are fewer restrictions on LLC ownership compared to that of S corporations (One hundred shareholders is the maximum for S corporations.). Be sure to check with your CPA for proper guidance.

What are the differences between C Corps and S Corps?

C  No matter what kind of corporation a person may choose, the corporation will be a structure, separate from the stockholders, because it is considered a “legal person.” In addition, the officers are personally protected from corporation debt collectors and also the irresponsibility’s incurred by the corporation, providing that the law hasn’t been breached by the said corporation.