INCORPORATE IN NEVADA ONLINE! OFFERING ASSISTANCE IN FORMING NEVADA CORPORATIONS, LIMITED LIABILITY COMPANIES
This section explains the procedure how to incorporate in Nevada as well as post-incorporation operations. There is a big difference between filing articles of incorporation and incorporating. The procedure to incorporate in Nevada is similar to the incorporation process in other states, but not identical. Choosing to incorporate is one of the most important decisions you can make regarding your business. It is also one of the most complicated, requiring that you answer several questions determining your company's future. What name will you incorporate under, and is it available? Will you incorporate in your state, or another state such as Delaware or Nevada? Should you choose to be a corporation, or a limited liability company (LLC)?
What you decided will influence not only how much you have to pay for incorporation, it will also affect your taxes and liabilities for years to come. The complexities of incorporating have lead many business owners to incorporate through a lawyer, spending more money and time than if they had chosen to incorporate online. If you would like to incorporate online or have questions about the benefits of online companies formation for your business, this site offers many additional resources for researching online incorporation. Once you have made the savvy decision to incorporate online, they can help get you started with this easy questionnaire. Incorporate in Nevada Online: Free Name Check For Your Nevada LLC or Corporation |
Here is all you need to know about how to incorporate your business in Nevada, the acknowledged corporate capital of the United States. The business advantages of owning a Nevada corporation are substantial while the cost is nominal. Your Nevada corporation can conduct any lawful business anywhere in the United States or, indeed, anywhere in the world. As a corporation, your business will have not only the corporate attributes which caused you to incorporate in the first place, but it will also present a more professional image to the business world. How to Become a Company in the State of Nevada »Click Here for More Details |
Our company is specialized in business incorporation in Delaware, California, New York and Nevada, etc. Form a Corporation, Non-Profit or LLC in New York, Delaware or Nevada. We may help you to incorporate in Washington, Florida, California, Arkansas or Oregon. Coddan offers online USA company start-up services, including Delaware corporations and assists businesses incorporating in Nevada. Provides rush filing options, name reservation and all incorporation filings needed to form your corporation or an LLC. If you would like to incorporate your business online or have questions about the benefits of online incorporation for your business, this site offers many additional resources for researching online incorporation. It is possible to retain nominee officers and directors for your Corporation or nominee members and nominee managers for LLC, who are then listed on the public records. Coddan offers corporate members and directors or nominees to ensure full service to clients. It is not necessary for the officers and directors to be USA residents, nor is it necessary for the officers to be directors of the company. Don't know which type of Entity to form? Call one of our specialists for a FREE CONSULTATION today! Call 0-207-060-0382 or you can chat with one of our reps live online.
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In our experience, the most tax advantageous type of company for Non-US Residents of the United States is the Limited Liability Company (in some countries this is referred to as "Sociedad de Responsablidad Limitada"). Similar to a Sub Chapter S Corporation for Citizens of the U.S., in a Limited Liability Company, the earnings flow directly to the owners, thereby eliminating Corporate Income Taxes. A regular corporation would be subject to Federal Corporate Income Tax and State Corporate Income Tax. These combined rates can be as much as 40% of the Profits. Whether you are an entrepreneur, attorney, or certified public accountant, we can help you establish a company in Nevada and provide specific information about forming a company in this jurisdiction. When you call, a real live person answers the phone during business hours, and you'll find our in-house attorneys and staff competent, discreet, and ready to discuss your unique requirements. We prepare the paperwork that establishes your company, and we file it with the Nevada Secretary of State. Coddan has everything needed to form a Nevada corporation. We have many years of experience, and have established thousands of corporations, LLC's, trusts and partnership arrangements both in Nevada and Offshore. We're always happy to discuss your unique requirements! We work with international as well as domestic clients. A real live person answers the phone during business hours, and you'll find our in-house attorneys and staff competent, discreet, and friendly. If you have questions please E-Mail or call us: Call FREE 0800 081 1510, Overseas Residents: +44 845 020 4269 or +44 20 7060 0382, Fax: +44 20 7681 3318 or USA Toll Free: 1 877 557 5939. Nevada Incorporation Package - £184.00! » Nevada LTD (INC) Company Registration Packages & Costs | (Price Includes Standard State Filing Fee)
With The Coddan, forming a Nevada limited liability company (LLC) is a fast, easy and affordable process. We can help you through every step of the incorporation process. From choosing the plan that best fits the needs of your company, to acting as your Registered Agent, The Coddan is there to make the formation of your limited liability company as quick and simple as possible. This enables you to focus your time on what matters the most, your business. If you want to become familiar with the description and the contents of Nevada LLC formation packages, offered by our company and to find above, what kind of service is included in this or that Nevada companies incorporation package, to get an idea about the price of annual renewal of the service, and about the general legal requirements to the company incorporation within State of Nevada, please, select the package you need from the list, situated below the banner. The information in the banner will be renewed according to the package you've chosen. Nevada LLC Formation Package - £212.00! » Nevada LLC Formation Packages & Costs | (Price Includes Standard State Filing Fee)
Please note » The prices payable for the items that you order are clearly set out in the web site. There will be no contract of any kind between you and us unless and until we receive payment from you. We are not able to guarantee that any such filing will be acceptable to Secretary of State, nor are there any contractual obligation upon us to do so. If Secretary of State rejects incorporation or other electronic filing, we will credit your account with a full refund and the contract between us will be made void. Secretary of State does not offer a cancellation facility for the incorporation of companies or the electronic filing of documents. We will be unable to cancel any such submission on your behalf and will not refund any payment you have made. All prices shown at Coddan Web Site are in Great British pounds. Credit cards are the preferred method of payment; we accept VISA, MasterCard and Delta. We can accept payment in UK Pounds Sterling, US Dollars, Euros, Australian Dollars and Canadian Dollars.
Live Help » Live Help is a real time "chat" feature which enables you to interact with a customer service representative without a phone call. Get answers to your questions while using our website. Clicking the "Live Help" button will start an on-line session with one of our representatives. Live Help is currently available during normal business hours. Outside of the above opening hours our business center will be closed. When you click on the button you will see an e-mail form that will allow you to send us a mail with your questions. Live Help is absolutely free! There are no hidden fees. We offer the service as a courtesy to our website visitors. Dear visitors, while having a chat session with a customer, we are frequently requested to give a piece of advice on tax planning or business structuring. We would like to inform you that it is against our principles to provide online advice pertaining to these issues. The points that may be covered during a session include service description, package or service price, navigation at our website, ways of making an order, methods of payment etc. Yet, if you wish us to provide you with advice on tax or business structuring, you should be aware that this service is chargeable. If you have questions please E-Mail or call us: Call FREE 0800 081 1510, Overseas Residents: +44 845 020 4269 or +44 20 7060 0382, Fax: +44 20 7681 3318 or USA Toll Free: 1 877 557 5939.
WHY INCORPORATE IN NEVADA?
And more importantly, why were nearly 45,000 entities formed here last year? Unfortunately, most businesses incorporate in Nevada for the wrong reasons: to save money on state income taxes and to maintain privacy. Nevada is now the preferred jurisdiction in which to incorporate. Incorporating in Nevada gives access to a series of fiscal and legal benefits. Asset Protection and tax exposure reduction are the two primary reasons that people choose to incorporate in Nevada.
1. Minimum Number of Incorporators - One or more. 2. Eligibility Requirements - None. 3. Duties - Delivering articles of incorporation to the Secretary of State for filing. 4. Listing Requirements - The name and address of each incorporator. Directors are required to be listed in the articles of incorporation. 5. Corporate Purpose: Nevada allows a corporation to be formed for any lawful purpose(s). 6. Minimum Number of Directors - One or more. Age Requirements - Directors must be a natural person at least 18 years of age. Residence Requirements - No provision. 7. Eligibility Requirements - The articles of incorporation or bylaws may list director qualifications. A director does not need to be a resident of this state or a shareholder of the corporation unless stated in the articles of incorporation or bylaws. 8. Nevada has no business income tax, corporate shares taxes, state corporation tax, franchise tax, or inheritance tax. Further, corporations do not have to file state tax returns and share information is held private. 9. Officers are not required to be listed in the articles of incorporation. 10. The articles must list the number of shares the corporation is authorized to issue, including certain information on classes and the par value of each share.
The main reasons to incorporate in Nevada are lawsuit protection, credibility, tax savings, deductible employee benefits, anonymity, the ease of raising capital, creating a separate legal entity for personal protection, a Nevada Corporation has a broad range of powers beyond that of a sole proprietorship, small claims court benefits, separate liability for corporate debts, and perpetual duration. When you incorporate in Nevada you create a separate legal person. You are a shareholder. You can control the corporation. However, when the Nevada business is sued you can be protected from being sued personally when you incorporate in Nevada. When you incorporate in Nevada with Coddan, we prepare and file your articles of incorporation with the Nevada Secretary of State. To help you successfully incorporate in Nevada, we also conduct a name search, assist you in the preparation of bylaws and provide other customized services corresponding to your needs. Once your articles of incorporation have been successfully filed, your Nevada corporation begins its existence as a corporate entity.
Nevada corporation formation is a process that is reviewed by the Nevada Secretary of State. This office reviews your corporate information and assesses your validity as a business entity in the state. In many cases you will also need to apply for a tax identification number with the Internal Revenue Service. This number is necessary to open most corporate bank accounts. If you are operating a corporation from another state you will also need to find a registered agent. This is a person or company that is responsible for receiving correspondence and other material on behalf of the corporation. There are other additional requirements for complying with state business regulations.
There are a number of different reasons to incorporate Nevada businesses. You not only protect yourself from financial responsibility and legal liability, but you also receive several tax incentives as well. If you and your partners are in business together, Nevada corporation filing can protect you from having your personal bank accounts subject to lawsuits and other judgments against you. Nothing is worse than living in fear of a lean on your property and other assets. When you incorporate Nevada businesses, you also protect yourself from your business partners' bad decisions. When you partners make mistakes in the name of the corporation, you are not held personally responsible for their errors. The corporation process is a way to create a separate entity for your business, and separates that entity from the members who make up the board of directors.
When you incorporate Nevada businesses, you also receive several tax incentives. For one thing, you can write off the costs of providing your employees with medical or dental insurance, and other benefit packages. These services are considered business expenses that can be deducted from your operating costs come tax season. You will want to determine the type of corporation you want to set up. This is important because different types of corporations have different benefits. One consideration is the type of organizational structure you want to implement. Many times this consideration is dependent on the size of your business, and you goals for the future. You will also want to consider the type of stock options and investment opportunities you will want to present the general public and investment entities.
If you're thinking about reorganizing your business, you might want to form a Nevada LLC. You receive some of the benefits of Nevada corporation filing without being hit by the double taxation common in S corporations. Many Nevada corporations are subject to taxes on profits and additional taxes on dividends. This is not the case when you form a limited liability company. If you form a Nevada LLC you will receive protection from personal liability for things like lawsuits ad other financial claims against the company. In an LLC, you do not issue stocks to raise funds, or revenue for capital investment. Instead, members are issued interest certificates that reflect the amount or share of their investment in the company. An LLC is run by the members, and the power vested in these members is determined by percentage of ownership.
You can form a Nevada LLC by filing with the office of the Secretary of State. In most cases this process is simple, and takes as little as a couple of days to complete. It's a good idea to consult with an attorney or other financial adviser before filing for this status. You may want to weigh the alternatives to determine which business structure meets the needs of your business, your customers and your partners. You can form a Nevada LLC through the office of the Nevada Secretary of State. This is a relatively recent way to structure a business that helps to protect individuals from financial liability. An LLC, or limited liability company, is structured in a similar manner to traditional corporations. You can file for a Nevada LLC in just a matter of a couple of days. There are a number of restrictions and bylaws which you must agree to adhere to in order for your business to be granted LLC status. You can find specific information about the process online by searching the official website of the Secretary of State. Many times forming a Nevada LLC allows you to receive some tax benefits that you cannot receive when you form a full-fledged corporation. It's important to weight the advantages and disadvantages with someone who you can trust. If you find the process overwhelming, you can hire a filing company to do the job for you. This is a great idea if you are filing out of state, or you find the process overwhelming. If you live outside of the state of Nevada, or outside of the country, and you're thinking about filing for corporate status, you will need to find a Nevada registered agent. This is a person or company that is charged with accepting official documents and other correspondence on your behalf in your absence. You can personally employ someone to perform this task, or you can hire a filing company to do the job for you. During the course of the fiscal year, the Nevada Secretary of State may need to contact you regarding all kinds of different business concerns. You will not be granted corporate status until you provide the name and address of your Nevada registered agent. This is a safety net required by the state to ensure that you run a responsible and ethical business in the state. You May Use This Link to Select Ready-Made Company »List of Nevada Off The Shelf Companies |
Many time business owners and board members choose to incorporate to protect their individual investments. If you're a business owner, you know how frightening it can be to face litigation from customers and business partners. When you form a corporation in Nevada, you protect you bank accounts and personal property from loss. In exchange for this security, you must provide a Nevada registered agent for the processing and servicing of all legal claims against the corporation. One of the best things you can do if you live outside the state of Nevada is assign a non-partisan registered agent. This provides you with the additional protection you may need when it comes to defending your business practices in a court of law. Many Nevada corporation filing companies offer this service for a nominal fee. This is a great way to take the worry out of official state business. Unlike a personal friend, or business partner, hired agents are paid to perform the simple task of receiving and forwarding all official business.
All our Nevada companies are general trading companies which include search name availability for your Nevada Corporation. Preparation and filing of Certificate of Incorporation with state office. Our incorporation service and State filing fees. Certified Copy of the Certificate of Incorporation. Nevada Resident Agent for 12 months. Registered Address in the State of Nevada for 12 months. Delivery Certified Copy of the Certificate of Incorporation is delivered as hard copy by post. The following documents will be delivered via E-Mail: a professionally-prepared 20 page Nevada Corporation By-laws ready-for-signature (Word. format). Minutes or Consents Documentation of Organizational Meeting.
THE FOLLOWING UPGRADES CAN BE ADDED TO THE ABOVE PACKAGE:
1. Nominee Director service for 12 months - £140.00 2. Nominee Shareholder service for 12 months - £94.00 3. Non-Standard Certificate of Incorporation (4-5 pages) - £60.00 4. Employer Identification Number (EIN) - £40.00 5. Domain Name Registration (.com or .us) for two years - £30.00 6. 888, 877, or 866 toll-free telephone numbers - £50.00 7. Apostilled Certificate of Good Standing - £125.00 8. Apostilled Certificate of Incorporation - £110.00 9. Corporate Kit (seal is included) - £38.00
Coddan offers a unique combination of professional services ranging from domestic Incorporation, Partnerships/LLC's, and Business Trusts, Nominee Director services, complete Office Suite/Identity services. We will advise clients, as they require, detailed explanations of structural organization that will minimize their tax exposure. We also can prepare articles of incorporation, by-laws and shareholder/board of director minutes and/or operational contractual agreements. Our services are designed to meet the needs of our clients from all over the globe.
The information provided will guide you through the process of domestic incorporation and furnish you with instructions for operating your business entity. Please refer to the home page for the appropriate subject of interest. To establish your Nevada business entity goes to the appropriate order form page. Coddan's combination of services are second to none. Our ability to offer clients advice and guidance through the assistance of professionals with expertise in the areas of, tax planning and corporate legal services assures that your goals will be achieved in a timely and affordable manner. We are always available to discuss the particulars of your individual circumstances and to offer our advice. We advise all prospective clients to we aware of incorporation companies that do not give their address or complete pricing in advance.
IT'S EXTREMELY DIFFICULT FOR ANYONE TO PIERCE YOUR CORPORATE VEIL
First, what exactly does "piercing the corporate veil" mean? When you form a corporation, whether it's in Nevada, California, Texas or wherever, you must follow certain corporate formalities. Remember, a corporation can do everything you can do except act or think, so it does those things through your board of directors, officers and shareholders. If your corporation does not keep accurate records of meetings by minutes, and if the corporation commingles funds, it makes it easier for someone to pierce your corporate veil if the corporation is involved in a lawsuit.
Low capitalization is another reason why corporate veils get pierced. In some states, like California, we recommend that you capitalize your corporation with at least $1,000. If you don't, it's easier for someone to prove that you are simply the alter ego of the corporation (one and the same as the corporation), and then pierce your corporate veil! How does Nevada feel about this? Nevada is called a "thin capital state," meaning you can form a corporation in Nevada for as little as $100. Also, Nevada has a certain attitude about piercing the corporate veil, which is why major corporations domicile in Nevada. Let's explain.
First, in Nevada, anyone trying to sue you must pass a three-prong test-they must prove all three parts to pierce your corporate veil: the corporation must be influenced and governed by the person asserted to be the alter ego; there must be such unity of interest and ownership that one is inseparable from the other; and the facts must be such that adherence to the corporate fiction of a separate entity would, under the circumstances, sanction fraud or promote injustice. The burden of proof for all three "general requirements" is on the plaintiff who is seeking to pierce the veil, and a failure to prove any of the three will result in your veil not being pierced! Essentially, Nevada says that unless they can prove fraud, your corporate veil will not be pierced! That is awesome protection!
We recommend that you keep accurate corporate records to protect your corporate veil, and make sure you have adequate capitalization as well. In Roland, the corporation had a negative net worth at the time of the trial so it was clear it was inadequately capitalized. On top of that, the corporation never held formal directors or shareholders meetings, never started or kept a corporate minute book, never paid dividends, and didn't pay salaries to the officers or directors. On the other hand, the corporation managed to secure a corporate checking account, as well as a general contractor's license and a framing contractor's license, "both in its name." What happened? The court concluded that, "Although the evidence does show that the corporation was undercapitalized and that there was little existence separate and apart from [the two key shareholders]…evidence was insufficient to support a finding that appellants were the alter ego of the…corporation." The Nevada Supreme Court has made clear that unless the plaintiff acting against you is able to meet the burden of proving that "the financial setup of your corporation is only a sham and caused an injustice," your veil is unlikely to be pierced. Nevada appears as an IRON FORTRESS to creditors. In fact, the corporate veil has only been pierced two times in Nevada in the last 23 years! And that was a case where the corporation was actually doing business in Nevada and had committed fraud against a Nevada resident.
TAX ADVANTAGES
The first main consideration when deciding whether to incorporate in Nevada is the effect on tax exposure. Nevada offers corporations outstanding fiscal advantages. Nevada has no business income tax, corporate shares taxes, state corporation tax, franchise tax, or inheritance tax. Further, corporations do not have to file state tax returns and share information is held private.
ASSET PRIVACY
One advantage of Nevada incorporation is that it provides beneficial owners with unparalleled asset privacy. Nevada’s reporting and disclosure obligations are lighter than in any other state.
FLEXIBILITY
In Nevada the shareholders of a standard corporation may consist of any number of individuals of any nationality, and/or any number of Corporations. Shareholders identities are protected in Nevada. Any individual or nominee, as a Director or Officer in a Nevada Corporation, is protected from personal liability for acts committed on behalf of the Corporation, by the Corporation.
CORPORATION ORGANIZATION
What is Incorporation and what are the benefits? Incorporation is the establishment of a legal entity otherwise known as a Corporation. Corporations may enter into contracts, open financial accounts and is generally afforded rights and privileges similar to a person. Asset Protection and tax exposure reduction are the two primary reasons that people choose to incorporate, or organize as Limited Liability Companies (LLC) and Limited Partnerships (Ltd. Partnership).
All our Nevada LLCs are general trading companies which include search name availability for your Nevada LLC. Preparation and filing of Certificate of Formation with state office. Our incorporation service and State filing fees. Certified Copy of the Certificate of Organization. Nevada Resident Agent for 12 months. Registered Address in the State of Nevada for 12 months. Delivery Certified Copy of the Certificate of Formation is delivered as hard copy by post. The following documents will be delivered via E-Mail: a professionally-prepared 20 page Nevada LLC Operating Agreement ready-for-signature (Word. format). Minutes or Consents Documentation of Organizational Meeting.
THE FOLLOWING UPGRADES CAN BE ADDED TO THE ABOVE PACKAGE:
1. Nominee LLC Member for 12 months - £140.00 2. Nominee Operating Manger for 12 months - £140.00 3. Non-Standard Certificate of Organization (4-5 pages) - £60.00 4. Employer Identification Number (EIN) - £40.00 5. Domain Name Registration (.com or .us) for two years - £30.00 6. 888, 877, or 866 toll-free telephone numbers - £50.00 7. Apostilled Certificate of Good Standing - £125.00 8. Apostilled Certificate of Incorporation - £110.00 9. LLC Kit (seal is included) - £38.00
One advantage of Incorporation is that it provides beneficial owners, known as the shareholders in a corporation or members in a LLC or Ltd. Partnership, the means to reduce their risk exposure. Shareholders are not personally liable for activities of the entity. This is referred to as the provision of Limited Liability. As you are aware, in this litigation oriented society no one is immune from the threat of attachment of assets; whether it be through frivolous lawsuits or misguided judgments. Through incorporation, one may preserve their anonymity, as shareholder identities are protected in various jurisdictions. Incorporation provides the first level of asset protection that allows individuals to form business ventures, expand existing operations and secure accumulated wealth.
TAX EXPOSURE
The second main consideration is the effect on tax exposure. Corporate entities can typically lower their taxable income through the deduction of expense items involved with the operation of the entity. A professional tax accountant can provide guidance as to what is generally acceptable according to IRS guidelines. Significant tax savings may further be realized by incorporating in tax-free jurisdictions. For example, Nevada imposes no state income taxes and the Bahamas does not impose any taxes or filing requirements for International Business Corporations (IBC).
TAX COMPLIANCE AND THE CORPORATE SHIELD
To reduce Federal and State taxes, and protect assets held by your business entity, the entity must prove it operates and does business from within the jurisdiction of incorporation. The ability to reduce tax exposure of the Entity should be considered when choosing the jurisdiction of incorporation. By following the correct procedures, an Entity may be operated through the jurisdiction of incorporation, even without your physical presence within that jurisdiction. Corporate presence is established by processing all invoices, purchase orders, payroll, correspondence, and disbursements through that jurisdiction.
To best meet IRS compliance guidelines, the Entity must establish a legal street address, mail service, communication (telephone answering service) and banking services within the jurisdiction of incorporation. The bank account should indicate the name, address and telephone number of the Entity. All payments for office rental, telephone, personnel, licenses, etc. should be paid by check from that bank account. Sales, purchases, contracts, exchange of funds, tax returns, information returns, etc. should be consummated at the primary business office within the jurisdiction of incorporation. All receivables, payables, deposits and correspondence must be mailed to/from the business office in the jurisdiction of incorporation. The Entity should also have a business license and/or Certificate of Authority from the jurisdiction of incorporation. This "paper trail" proves that your Entity operates and does business within the jurisdiction of incorporation. Supporting activities may be carried out at your current place of business.
CASE SCENARIO
Mr. B. Rogers sells sports equipment in California and desires to protect his assets and reduce his tax exposure. Mr. B. Rogers decides to form Acme Sports, Inc., a Nevada corporation. This separates Mr. B. Rogers' personal assets from his business activity, thereby affording him limited liability and asset protection (the corporate shield). Additionally, Nevada does not impose state income taxes, thereby reducing Acme Sports, Inc. tax exposure. One day Acme Sports, Inc. sells a football to Charles Brown. Charlie tries to kick the ball, but misses and falls on his back. A young attorney happens to be on the scene and persuades Charlie into suing Mr. B. Rogers for not placing adequate kicking instructions on the ball.
Problem. How does Mr. B. Rogers protect his personal assets from the lawsuit?
Solution. Through the utilization of an Offshore Identity Program, Acme Sports, Inc. proves that it does in fact operate as a separate entity from within the jurisdiction of incorporation (Nevada). Mr. B. Rogers reveals that the business has a legal street address, phone service is available, revenues are deposited in the Nevada bank account, and expenses are paid from that Nevada bank account. The lawsuit is eventually dropped. Unfortunately the young attorney's brother-in-law works for the California Department of Taxation, and he has an appointment with Acme Sports, Inc. regarding its state tax return. The dollar signs quickly fade from the brother-in-law's eyes as Mr. B. Rogers proves that Acme Sports, Inc. is in fact a Nevada corporation operating from its Nevada headquarters. While Acme Sports, Inc. did file a California state tax return, its tax exposure was simply a weighted percentage of the sales consummated in California. This drastically reduced the tax liability, much to the chagrin of the brother-in-law.
LIMITED LIABILITY COMPANY (LLC). TAX COMPLIANCE AND THE CORPORATE SHIELD
A business organized for purposes other than banking or insurance may find it advantageous to establish itself as a Limited Liability Company rather than as a corporation. A Limited Liability Company (LLC) is a hybrid between a corporation and a limited partnership. Members are afforded the limited liability of corporate shareholders and the pass through tax advantages of a partnership without the restrictions imposed on limited partnerships and Subchapter S corporations. Management and ownership may be structured in any fashion as specified in the Operating Agreement, thereby allowing for total flexibility in income distribution. In addition, the Operating Agreement is not required to be publicly filed, maintaining confidentiality of the ownership structure.
The principal issue when forming an LLC will be whether pass-through taxation is desirable; if not, the LLC can be structured to be taxed as a corporation. The LLC can be organized with two or more members. Members may be any person or legal entity, domestic or foreign, who own an interest in the company. Members have no liability (under California Corporations Code Section no. 1700, Chapter 86 of NRS in Nevada, and under WS 17-15-101 through 17-15-136 for Wyoming) for the debts, obligations or liabilities of the company to any third parties, whether any such debts, obligations or liabilities arise out of contract, tort or otherwise, solely by reason of being members of an LLC. An LLC requires no general partner, so all of the members have the same limited liability, regardless of ownership interest.
Unlike a Limited Partnership, a Limited Liability Company is not required to declare a general partner. The manager of a Limited Liability Company does not have to maintain a one percent interest in the entity; therefore the personal assets of the manager can not be attached by a creditor seeking payment of a Limited Liability Company debt. Furthermore, no member of a Limited Liability Company may be held fully liable for any debts of the company.
LLC's can allocate specifically any distribution of income, gain, deduction, or loss among its members. Stockholders of corporations organized under Subchapter S of the IRS guidelines are limited to distributing interest among its shareholders in proportion to holdings of capital. The entity may have any number of stockholders, unlike a sub S corporation that is restricted to a maximum of 35 investors. In addition, corporations, partnerships, certain kinds of trust, and non-resident alien individuals are restricted from being shareholders of a sub S corporation. LLC's are not subject to these restrictions.
LLC operating costs are inherently lower those of a sub S corporation. Whereas a general partner may not be removed by members of the Limited Partnership, an LLC is not required to declare a general partner. Managers designated by members of an LLC may be subject to removal if desired. Businesses Which Benefit Most From Becoming An LLC. Companies that are closely held entities not to be traded publicly in the near term may benefit from organizing as an LLC. Business activities which typically benefit from organizing as an LLC include:
Real Estate Developers - Members may contract debt (acquire loans) on behalf of the LLC. Once the property is acquired, any income, gain, deduction, or loss may be specifically allocated among the Members. This combination of provisions essentially allows for the transfer of capital gains from one member to another. The obvious advantage is when allocating the capital gains from a domestic entity to a foreign entity, typically a Bahamas (IBC) Corporation. The domestic entity avoids the excise tax for a transfer of property to a foreign entity and the foreign entity is exempt from capital gains taxes!
Corporate Joint Venture - Rather than using wholly owned subsidiaries to establish a general partnership joint venture, corporations may form an LLC that will provide the same amount of limited liability as well as pass-through taxation.
Subsidiaries of Sub S Corporations - A sub S corporation may not own more than 80% of an LLC subsidiary corporation; however, a sub S corporation may form a wholly owned subsidiary LLC. Owning the subsidiary LLC would allow the parent S corporation to expand its resource base.
Venture Capital Vehicle - LLC's allow considerable opportunities for investment of company capital into income-generating ventures since the potential number of investors are unlimited. Venture profitability can be enhanced further when members are structured as offshore corporations. This not only allows for reduction in tax exposure, but also a greater level of asset protection and scrutiny. Bahamas Incorporation Services are available through Nevada First Holdings, Inc. Please call for additional information.
Small or Family Businesses - LLC's are ideal for small or family-operated businesses. There is total flexibility for structuring management and ownership, and members avoid double taxation.
ORGANIZATIONAL DIFFERENCES AMONG THE STATES
There are four important distinctions among the States:
Dissolution Date - California must specify a dissolution date, which may be at any point in time. Neither Nevada nor Delaware may specify a period of duration greater than 30 years. Wyoming has no limit, and may designate "perpetual" as a period of duration if so desired.
Cash Contribution Disclosure - Organizing in Wyoming requires disclosure of the total amount of cash contributed to the company as well as the total cash value of property contributed to the company at the time of formation. Nevada and California have no such requirement.
Freedom of Contract - Delaware will only provide rules for matters on which the Members of the LLC have failed to agree as per the Operating Agreement. This contractual flexibility as devined by Delaware Corporate Statutory Law is superior to that of any other state.
State Taxation - Nevada and Wyoming do not have a State income tax; California levies an annual franchise tax of $800.00; Nevada requires an annual List of Officers or Members filing, fee $175.00; Delaware levies an annual franchise tax of $200.00.
TAX AND OPERATING DIRECTION
Limited Liability Companies are taxed as a "pass-through" entity, unless otherwise structured in the organizational documents.
LIMITED PARTNERSHIPS
Limited Partnerships combine the limited liability benefits of incorporating with the pass-through taxation of partnerships. Limited Partnerships may be the best vehicle for business formation if liability can be vested in one person, the General Partner. At least two persons are required to form a Limited Partnership - one General Partner and one Limited Partner. Each Limited Partner is limited in liability to the amount of capital contributed, and items of profit and loss pass through to the individual. Limited Partnerships are formed and managed by the General Partner(s), and Limited Partners are not required for the organization. Limited Partners do not participate in the operation of the partnership. Because partners’ interests may not be freely traded, Limited Partnerships should not be formed if liquidity of investments is desired.
Subsequent persons may be admitted as General Partners or Limited Partners, pursuant to established partnership agreements or to unanimous consent. The contribution and distribution of capital is generally allocated in the partnership agreement. Changes in the allocation may be made by unanimous consent or as stipulated in the partnership agreement. Limited Partnerships can not operate in perpetuity; a dissolution date must be submitted at the time of organization. The aforementioned characteristics of a Limited Partnership should be compared to those of a Limited Liability Company when deciding which business entity best fulfills your needs.
DOES NEVADA SHARE INFORMATION WITH THE IRS? AGREEMENTS OF COOPERATION" BETWEEN THE IRS AND THE STATES
Internal Revenue Code (IRC) § 6103(a) states that tax "returns and return information shall be confidential," and that no federal or state employee "shall disclose any return or return information obtained by him in any manner." For purposes of this law, a "return" is "any tax or information return," § 6103(b)(1), and "return information" means:
A taxpayer's identity, the nature, source, or amount of his income, payments, receipts, deductions, exemptions, credits, assets, liabilities, net worth, tax liability, tax withheld, deficiencies, over assessments, or tax payments, whether the taxpayer's return was, is being, or will be examined or subject to other investigation or processing, or any other data, received by, recorded by, prepared by, furnished to, or collected by the Secretary with respect to a return or with respect to the determination of the existence, or possible existence, of liability (or the amount thereof) of any person under this title for any tax, penalty, interest, fine, forfeiture, or other imposition, or offense.
§ 6103 (b)(2)(A).
Despite the confidentiality of this information:
Returns and return information . . . shall be open to inspection by, or disclosure to, any State agency, body, or commission, or its legal representative, which is charged under the laws of such State with responsibility for the administration of State tax laws for the purpose of, and only to the extent necessary in, the administration of such laws.
§ 6103(d). In the above statute, the term "State" means any of the 50 states, Washington, D.C., Puerto Rico, the Virgin Islands, the Northern Mariana Islands, Guam, American Samoa, and the Canal Zone. § 6103(b)(5).
In order to put § 6103 into action, 48 states, Washington, D.C., Guam and American Samoa have entered into "agreements of cooperation" with "the IRS on the exchange of information on taxpayers." CCH Standard Federal Tax Reporter, vol. 15 (2002), 36,894.576 at 64,490. The two states who possess no such agreement with the IRS are Nevada and Texas. Id. "The purpose of the agreements is to identify persons who have failed to file either Federal or state tax returns through cooperative inspection of the records." Id.; see also 36,894.77 at 64,515.
While this purpose is legitimate, it is hardly likely that the result is as benign as it sounds. This conclusion is based upon two factors. First, if the goal is merely to identify persons who have failed to file either a Federal or state return, why is the state allowed so much information? IRC § 6103(b)(2)(A) allows the IRS to disclose a great deal of personal information. It is likely that the IRS is receiving similar information from the states. Second, besides Nevada and Texas, five other states (Alaska, Florida, South Dakota, Washington, and Wyoming) have no income tax, and two (New Hampshire and Tennessee) have a very limited tax on personal income. In these states, since no state form may be filed (in conformance with the law), the sharing of information is useless in identifying one who may have failed to file a return. Thus, in these states, local authorities will possess a great deal of knowledge of your personal finances, even though no state tax forms need to be filed. This, however, cannot occur in Nevada and Texas.
Because Federal tax returns must be sent, the IRS will necessarily possess a great deal of information about a taxpayer. The IRS can only provide this information to a state when it is administering its tax laws. IRC § 6103(d). Without an income tax and an "agreement of cooperation," the states of Nevada and Texas will know little of the personal finances of its citizens. Thus, if privacy is a concern, there is a benefit to living in these two states.
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