When starting a business, it is crucial to consider what type of business to form.  The type of entity you choose can have a substantial impact on your legal liability, your taxes, and your ability to grow.  Our Las Vegas business lawyers can help you determine which type of business is right for you.

Corporations 

The most common and well-known business entity, the corporation is governed by the state in which it is incorporated and may also be governed by the laws of the state in which the corporation does business.  Corporations are treated as entities separate from their owners and shareholders.  In this way, corporations can do nearly everything natural persons can – transact business, sue and be sued, buy and sell real and personal property, and enter into contracts.  Corporations are formed with the intent to be ongoing, beyond the death of any of its shareholders or owners.  This provides an advantage in that the corporation’s existence is not dependent on the life span of any of its members.

To form a corporation, one must file Articles of Incorporation with the Secretary of State.  Shareholders are usually issued stock certificates reflecting their percentage ownership share in the business.  The corporation also has the option of adopting Bylaws, which are rules of self-governance that will guide the growth and development of the business.  Our business law attorneys can assist you in drafting these Bylaws to help ensure the success of your business.

The management of a corporation is often directed by a Board of Directors.  The initial slate of directors can be dictated in the Articles, bylaws, or chosen by the incorporators.  Thereafter, directors are elected by the shareholders at the annual shareholders meeting.  The directors can then choose officers, who manage the day-to-day operations of the corporation.  

A shareholder’s personal liability is limited to the amount the shareholder has invested in the corporation.  Shareholders, directors, and officers are not liable for the debts of the corporation or for the illegal conduct of one another.

A standard corporation, also known as a “C” corporation, is a separate tax-paying entity for federal tax purposes and is subject to double taxation as follows: the corporation’s profit is taxed once when attributed to the corporation and taxed again when the profits are distributed to the shareholders as dividends.  

Subchapter S Corporations
Corporations may elect to be taxed as a Subchapter “S” corporation and be treated as a partnership for most tax purposes.  As such, the income, losses, deductions, and credits of the S corporation are passed through to its shareholders and are reflected on the shareholders’ individual tax returns.  In this manner, the profits are only taxed once, when they “flow through” to the personal tax returns.

General Partnerships

A general partnership is an association of two or more persons who carry on a business for profit.  These “persons” may not just be individuals, but can include corporations, partnerships, limited liability partnerships, and limited liability corporations.  Though the general partnership does not require any formal filings with the government, it is advisable that the partners enter into some written agreement to govern the relationships among and between the partners and provide a process by which the partnership may be dissolved.  Each partner has equal rights in the management of the business and is considered an agent of the partnership.  Therefore, the act of a partner can legally bind the partnership.  Consequently, each partner is jointly and severally liable for partnership debts, which may be satisfied not only with the partner’s percentage share of the partnership, but also with the partner’s personal assets.  Our business lawyers can draft a partnership agreement that provides for the profitable operation of the business while protecting the relationships among the partners.

Joint Ventures

In a joint venture, the members are co-owners of the business enterprise and share profits and losses.  A joint venture is distinct from a partnership in that it is usually formed for a single project or transaction or a series of transactions.  While a partnership is usually intended to be a continuing business for an indefinite period of time, a joint venture is limited in scope and duration.

Though no formal filings are required for a joint venture, it is highly recommended that the joint venturers enter into a written agreement to govern their conduct throughout the life of the venture.

Limited Liability Companies (LLC)

A limited liability company is essentially a hybrid business entity.  It combines the best attributes of both a corporation and a partnership.  Subject to limitations enumerated in its Articles of Incorporation, an LLC has all the power and authority of a natural person: to transact business, sue or be sued, make contracts, buy and sell real and personal property, etc.  However, the partners in an LLC enjoy the limited liability similar to that of corporate shareholders.  LLC members are not personally liable for any debt, liability, or obligation of the LLC solely by virtue of being a member.  They will be held liable, of course, for their own tortious acts.  Further, if the members are engaged in unlawful conduct in the name of the LLC, the courts may “pierce the corporate veil” and find the members personally liable for those intentional acts.

It is relatively simple to form an LLC, requiring the filing of Articles of Incorporation with the Secretary of State and paying the applicable filing fees.  

With regard to tax implications, the formation of an LLC does not qualify the entity for favorable tax treatment.  A single-owner LLC may elect to be taxed as a corporation but will be taxed as a sole proprietorship in the absence of an express election.

Limited Partnerships

A limited partnership requires a general partner and one or more limited partners who carry on a business for profit.  The general partner has exclusive management authority in the limited partnership, much like a partner in a general partnership.  Often, the general partner has more management authority than a limited partner, who does not participate in management decisions.  The expansive authority of the general partner is accompanied by an increase in his liability.  The general partner’s liability for partnership debts and obligations may be satisfied by his percentage in the partnership and by his personal assets.  A limited partner, on the other hand, can protect their personal assets from creditor claims.  A limited partner’s liability is usually limited to the assets contributed to the partnership and any obligations for subsequent contributions.  As long as the limited partner refrains from participating in management and control of the business, his liability is accordingly limited.  

Like in a general partnership, members of a limited partnership would be well-advised to have a qualified professional draft a partnership agreement.  This agreement may provide for the classes of general and limited partners and define the rights, powers, and obligations of each.

Non-Profit Corporations

A non-profit corporation (NPO) is one that is legally formed to participate in activities of public or private interest with no monetary or commercial gain.  Though an NPO generally does not operate to make a profit, it may collect, hold, and disburse money and other things of value.  These corporations typically subsist on donations from the private or public sector and are staffed largely by volunteers. 

Registering a non-profit corporation in Nevada involves registering with both the Secretary of State, to attain legal non-profit status, and the IRS, to obtain the tax advantages of operating as an NPO.  Section 501(c)(3) of the Internal Revenue Code provides for public recognition of tax exempt status, which helps to obtain grants; notice to donors that their contributions will be tax-deductible; and even mailing privileges.

Our business lawyers can handle all the incorporation documentation and filing in order to get your non-profit corporation up and running.

Sole Proprietorships

The most basic of business organizations, a sole proprietorship is owned and operated by an individual for profit.  That individual acts as the sole owner, manager, and decision maker.  The sole proprietorship therefore lives and dies with its owner.  With few exceptions, sole proprietorships require no formal filings with the government and are not required to follow any formalities in their operation.  Sometimes however, a sole proprietor may be required to maintain a business license or file for a fictitious firm name in the appropriate city or county.

With regard to taxes, a sole proprietorship’s profits and losses are reported on the owner’s individual tax return.  Business losses are treated as deductibles.

With regard to liability, sole proprietorships provide the individual owner no protection against liability.  The sole proprietor can be held personally liable for anything that happens with the business and may have their personal assets attached in the case of a successful lawsuit.