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Advantages and Disadvantages of Forming an LLC in Nevada



  A businessman shows an inscription: LLC

By Jennifer Paley

A corporation (LLC) is a type of business entity that combines the certificates of a limited liability company with the tax benefits of a partnerships. Each state has its own different set of laws that respect the LLC.

There are several benefits to forming an LLC in Nevada. Whether or not these features benefit a particular business owner, however, depends on the individual facts and circumstances.

Let's look at a few examples:

Taxation

While LLCs are not self-taxed by most states, their members are required to pay income tax on their proportionate share of LLCs' income (regardless of whether this income is actually distributed to them or not). However, Nevada does not collect income tax (individual, franchise or business) or inventory.

This sounds tempting, but it's a catch: Forming an LLC in Nevada will only allow you to avoid paying income tax on income derived either in Nevada or in another state (s) that does not impose income tax (and they States currently include Alaska, Florida, South Dakota, Texas, Washington and Wyoming). If the LLC has a presence in and collects income from a state that collects income tax, that state may impose income tax on all income generated by the LLC within its borders.

In short, tax is paid where the money is made! This principle applies even to Internet-based businesses ̵

1; you can not get around your own state's tax liabilities by forming an outside (ie foreign) LLC, even in Nevada.

Series LLC

While LLCs can afford the limited liability of their members (ie only LLCs assets can be sued in court, not individual members'), Nevada, along with a handful of other states (including Delaware), specifically provides the option to establish a "Series LLC," a unique designation that makes it possible to implement limited liability shields in the LLC to protect multiple assets held there without having to create multiple separate entities.

For example, if a Series LLC is listed with multiple entities, each has different assets, liability imposed by one entity does not cross over and endangers the asset (s) held by another entity. In this way, multiple assets can be held in an LLC with the same liability consequences as having set up separate and distinct LLC companies – saving members both time and administration costs. Series LLC also gives members the ability to group multiple businesses under one common banner / label.

However, there is a significant limitation that respects the effectiveness of establishing a Series LLC in Nevada in case of litigation. It only works if (1) all of the LLC & # 39 ;s assets and activities; (2) current plaintiff; and (3) current lawsuits, all located in Nevada. Otherwise, the LLC laws of another state may apply, and this version of a corporate veil may eventually be pierced.

Other articles from AllBusiness.com: Chapter19459009 ???? 19659007 ?? Privacy19199009008Nevada is known for providing a tremendous degree of privacy to businesses chartered in the state. In general, it has relatively low requirements for publication.

For example, Nevada is not a party to the IRS Information Sharing Agreement (ISA), created by the IRS to share information about infringing or evasive tax transactions, and the taxpayers who conducted them abroad, with participating States. Currently, 33 states are parties to ISA. Although Nevada was a party to the ISA, it has no income tax information to provide.

In addition, Nevada LLC owners are not required to identify themselves in public records, thus making it quite challenging for authorities and authorities, unscrupulous creditors and legal attorneys to find out about their identities.

Nevada's Privacy Policy has an exception that cannot be overlooked, but the protection does not cover directors, officers, executives and members of an LLC. The laws require that an LLC's organizational articles (a matter of public registration) state the name of at least one member. In addition, all Nevada LLCs must file an "Annual List of Officers and Directors," which requires the publication of the names of all LLCs officers and directors (which are then posted on the Nevada State Secretary & # 39 ;s website.

Domestic Vs. Foreign LLC

A domestic LLC is one that operates in the state in which it was organized.A foreign LLC is one that operates in a state other than where it was organized.Neveda allows outside entities to form an LLC in their state (i.e. say there is no residency requirement), and many businesses believe (rightly or wrongly, as is the case) that they will benefit from Nevada LLC laws.

However, if your business does not operate in Nevada, will be required to register the outside state of Nevada LLC as a foreign LLC in your home state, which means you must form two LLCs, which require about twice the cost, if not more, of simply creating an LLC in your home state.

Expense

The o org Anization fee for a Nevada LLC is among the steepest in the country, even higher than California (which is known for its expenses). Expect to incur multiple recurring filing fees, including those associated with an annual filing of the "annual list of officers and directors" and the required Nevada state business license (along with other required local business licenses).

Nevada is one of only five states that require business owners to have a business license in the state before they can file to form their company. And as mentioned earlier, if you create a Nevada LLC as a foreign LLC, your expenses will only double!

Reputation

Nevada has for a long time now a less business-like reputation. It is considered by many to be a ban on being a great place to pursue illegal purposes, such as creditor or tax evasion. This fainting perception does not serve a new company well, and as such provides another reason why Nevada may not be the best place to establish an LLC, especially for foreign businesses.

RELATED: [19659030] 10 Important Problems in Setting Up an LLC

About the Author

Post by: Jennifer Paley

Jennifer Paley is a Los Angeles based lawyer and writer which focuses on the following industries: entertainment, technology, VR, digital advertising, e-commerce, IP and privacy. Jennifer is a graduate of Harvard College and the New York University School of Law. In her spare time, Jennifer enjoys hot yoga, hiking in Southern California, volunteering and traveling. She was born and raised in New York.

Company: Paley Legal
Website: www.paleylegal.com
Contact me on Facebook and LinkedIn.


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