One of the most frequently asked question we hear is, “Which business entity is right for my business?” Although we cannot give you legal advice and make that decision for you, we can offer you valuable information so you can make an informed decision based on your business needs.
Which business structure is right for me?
| Compare | Corporation | Limited Liability Company | Sole Proprietorship |
|---|---|---|---|
| Purpose | Any lawful purpose | Any lawful purpose except insurance. | Any lawful purpose |
| Use | Own a business. To take advantage of lower corporate taxes compared to individual income taxes. If the company wants to be publicly traded. To deduct medical expenses. | Own a business. To own real estate. To hold cash for asset protection. To own stock in one's corporation. | Not recommended. |
| Ownership | Stock is personal property. No right to corporate property. May receive dividends. May participate in management. Free transferability of stock. Each stock class must be treated identically but can have different classes of stock. | Interest is personal property. No right to company property. May share in profits and losses. May participate is management. Restrictions can prevent interest from being assigned or transferred. | Entire business owned by owner. All property is personal property of owner. All profits and losses belong to owner. All management controlled by owner. Owner can sell business at any time. |
| Management | Corporate management structure is fixed. Shareholders can be officers or directors. | Can be manager managed or member managed. | Must be managed by owner. May be managers managed by partner. |
| Liability | Limited liability for all shareholders/owners | Limited liability for all members/owners | Owner personally liable |
| Benefits | Save 15.3% on taxes. Pay yourself a reasonable salary and pay the rest as a distribution to shareholders to save the 12.4% Social Security and 2.9% in Medicare, which saves you the 15.3% on income. | When owner is sued there are provisions in Nevada law to protect assets held inside of the LLC from being seized. | There are few benefits. Higher liability and fewer tax deductions than other entities. |
| Taxation | Never taxed as a partnership. Always taxed as a corporation. No self-employment income tax on distributions. No passive activity loss restrictions. | Generally taxed as a partnership and can be taxed as a corporation or as a pass through. | Always taxed as a sole proprietorship and never as a corporation or a partnership. |
| Who is taxed on the company profits? | Corporation | Your choice either the owner or the LLC | Owner |
| Double taxation? | Only if dividends are paid. You should pay salaries and bonuses instead if dividends. | No | No |
| Operating documents | Bylaws | Operating agreement | None |
Ready to Get Started?
Select your package, email us at agents@nevada.org, or call toll free today (888) 463-8462.
