There are MANY benefits to having an LLC. In fact, I'm creating 2 of them in Nevada! The cost for first year is $200 each. If you don't know someone there with an address, then you;ll need to find someone to sign for you as a NV local business rep.
WHY FORM AN LLC
BMW of North America, Microsoft Network, FOX Interactive Television or NFL Productions. These are familiar names. And they have one thing in common. They are all LLCs.
Most LLC owners will tell you that an LLC is the best way to go. An LLC offers the limited liability of a corporation while offering many flexibilities. We will try to explain the main benefits of an LLC in plain English below.
1) The number one reason:
An LLC has a major advantage: LLC laws doesn't allow a lawsuit to be filed against a member of the LLC for the liabilities of the LLC. Whereas the main officers of a corporation are routinely named as defendants in a lawsuit filed against the corporation. Therefore, the member's personal assets are safe unless he/she personally guarantees a debt.
2) 'Pass Through' of profit and loss:
All the profits and losses of the LLC are taxed on the member's personal income tax returns. Meaning if you are a single member of an LLC, you will report the profit or loss of your LLC in your form 1040. As such, an LLC offers the benefits of a regular Corporation without separate taxation. As with a partnership or a Sub-S corporation an LLC is a Tax Pass through entity.
What this means is: LLCs by default do not pay taxes. All income and losses pass-through to you as a member. So if you have losses in your LLC you can claim it against your personal income on your individual 1040. It is great for a start up business.
3) Ability to easily change to another form of entity:
It's easy to change your LLC to another form of legal entity. For example, you can change it to a C-Corporation. If you are starting a company, it may be beneficial to start a company as an LLC and write off the initial losses from your personal income and change to a C-Corp when the company becomes profitable.
4) Flexibility while allocating profits or loss:
This is a major benefit of an LLC. Unlike a Subchapter S Corporation where you are restricted as to how profit and loss are distributed among the owners and the type of losses you can pass-through to the owners, the members of an LLC can allocate ownership, profits and loss among the members anyway they like. In case of a C-Corporation, the profits and loss of the corporation cannot be allocated among the shareholders.
5) Business Asset protection:
LLC held assets cannot be seized by a member's creditor. Even if the creditor gets a judgment against a member, the creditor cannot get to the property owned by the LLC. The creditor has what is known as charging order remedy. Under which, if the creditor gets a judgment against a member of the LLC, the creditor is only permitted to collect any actual cash distributions that are made by the company to the member. Therefore, if no distributions are made to the member, there is nothing to collect.
WHY FORM A NEVADA LLC
Nevada has surpassed Delaware in LLC formation. Last year over 40,000 corporations were formed in Nevada and LLCs are gaining grounds as the popular form of corporate entity in Nevada.
Below are a few reasons we think Nevada is one of the best places to set up your LLC:
- Nevada LLC members cannot be sued for the LLC's liability: The following is a direct quote from the Nevada Revised Statutes: (NRS 86.371 Liability of member or manager for debts or liabilities of company):
"Unless otherwise provided in the articles of organization or an agreement signed by the member or manager to be charged, no member or manager of any limited-liability company formed under the laws of this State is individually liable for the debts or liabilities of the company."
Note: Attorneys will tell you that a member or manager can always be sued for criminal offences.
- No state tax in Nevada
- Universal Eligibility: You do not have to be US citizen to form an LLC in Nevada
- Single member LLCs are allowed
- Flexibility in location: You can have provisions in your Operating Agreement allowing you to have offices (whether commercial or home-based) outside the state of Nevada. We include it by default.
- Privacy: The state of Nevada does not share information with the IRS.
- Asset protection: Nevada is one of the toughest states in which to pierce the corporate veil.
- Corporate Ownership:
A Corporate entity (such as a corporation) can own an LLC unlike in case of an S-Corporation. In fact an LLC can be owned by a corporate entity formed anywhere in the world.
- Same-Day Creation:
Nevada allows you to set up your LLC same day.
Overall, an LLC maybe a better option for asset protection and for personal privacy purposes. Note that Nevada LLC Services is not a law firm and the above is not a substitute for legal or tax advice. An attorney can provide specific advice based on recent legal precedents in the courts.
Good luck.