The Best Way To Form Your Business In Nevada

Types of Business Structures

The future of your startup is tied to how you’ve structured your business and its processes today. It should be planned and regulated according to your goals while keeping in line with prevailing laws. So, it is better to research first than regret later. The most standard business structures in Nevada are:



Sole Proprietorship

The simplest business structure is the sole proprietorship. There is only one business owner in this business structure, and they are responsible for all business decisions, profits, losses, and debts. Being a sole proprietor means you are your own boss, but it also means great responsibility, such as expense evaluation, banking fees, office equipment, and tax payment.

Although you will encounter particular challenges as a sole proprietor, it does have its advantages.  One of the best things about the sole proprietorship is that it is very easy to set up.  As this type of business structure has an uncomplicated legal system, it is no wonder anyone can quickly start it.  Also, because you are the only owner, completing and approving paperwork is easy.

Moreover, obtaining a sole proprietor license is quite affordable.  If the need arises, you can easily dissolve the company without extensive paperwork and legal complications if your business fails.

Partnership

The partnership business structure consists of two or more owners. However, there are two types of partnerships:

1.            General partnership

2.            Limited partnership

In a general partnership, the shares of a business are divided equally between all partners. As a result, everyone gets the same share of profits and losses.

In contrast, only one owner has total business control of a limited partnership, while others have small contributions and profits.

Starting a business partnership can be expensive as you must hire a corporate lawyer to draw and review contracts. But it is almost as easy as creating a sole proprietorship.

The plus point of a partnership business structure is the higher chance of success. The reason behind this is that banks are more likely to fund partnerships than sole proprietorships. Additionally, having more than one person’s efforts can give you new and exciting business ideas, combine multiple skills and thus a better chance of thriving.

Limited Liability Company (LLC)

A limited liability company or LLC is a hybrid business structure, allowing owners to limit their personal liabilities while taking advantage of the legal flexibility of the partnership structure. A properly formed LLC protects its owners from personal debt, liability, or repayment responsibility. LLC members can benefit from company-generated income without paying direct taxes.

S Corporation

S corporation is a business structure for small startups as it saves them from double taxation. However, S corporations must meet specific Internal Revenue Code (IRS) requirements. If IRS requirements are met, the company has the right to pass income directly to shareholders without paying federal corporate taxes. Therefore, a Properly Formed S corporation is best for obtaining regular incorporation benefits while having the tax-exempt privileges of a partnership.

C Corporation

C corporation is a double tax business structure having multiple owners and a set of directors. C corporation owners pay taxes on personal and corporation levels, so the business owners or shareholders must pay taxes separate from the company. Additionally, C corporation allows unlimited investors.

Although C corporation demands double taxation, shareholders have the advantage of reinvesting profits in the corporate company at meager tax rates.

How to Choose a Business Structure?

Your startup can easily fall into any of these business structure categories. So, how do you determine which one is the right option? It depends on your financial needs, industry risk, and growth opportunities. Factors you should evaluate before making the decision:

Funding

If you need outside funding from an investor or bank, it is better to start as a corporation because otherwise, you will have trouble obtaining outside funding. Beginning as a sole proprietor is pretty simple and comes with very few legalities, but it is challenging to procure financing. Therefore, you must keep in mind which business structure is best for your financial needs.

Future Growth

Another factor that must contribute to your decision is your business’s future growth. It would help if you ensured that the business structure you are selecting allows the future growth envisioned for your company. Write down your objectives and see which type of business structure they align with.

Liability

Your business structure must carry the least amount of personal liability. This means that the law declares your company as its own entity. So, creditors can only sue the corporation and not take legal actions against your personal assets. In this situation, a properly formed LLC is the best option as it provides tax benefits of sole proprietorship while protecting your personal assets. However, if you are in a partnership, your liability is shared between you and your partners.

Taxes

As a small business owner, you can’t afford double taxation in the early business stages, so the C corporation is out of the equation. Moreover, as small business owners claim profits as their income, you need a structure that taxes your company only and not your personal assets. In this case, a properly formed LLC is often the best path to choose.

License

After registering your business, you must qualify and obtain a license and permits to work in the industry. Unfortunately, specific business structures can make it difficult for you to get a license and permit.

Control

If you want to be the primary authority of the business, choose between LLC or sole proprietorship. You can also create a partnership and negotiate to have the most control in the agreement. However, you can’t claim the most authority in any corporation business structure as it is based on shareholders and a board of directors who vote for decisions.

Wrapping It Up

A comprehensive business startup plan is necessary to succeed in the business market. However, selecting a business structure is complex due to certain legalities. Therefore, it is best to consult with business planning professionals to guide you on the right path.