Nevada Entity Comparison
Nevada LLC or Nevada Corporation...the choice is yours!
| Topic | Sole Proprietorship | Nevada LLC | Nevada Corporations |
|---|---|---|---|
| Purpose | Any lawful purpose. | Any lawful purpose except insurance. | Any lawful purpose. |
| Liability | Owner personally liable. | Limited liability for all members/owners. | Limited liability for all shareholders/owners. |
| Tax Treatment | Always taxed as a sole proprietorship and never as a corporation or a partnership. | partnership. Generally taxed as a partnership and can be taxed as a corporation or as a pass through. | Never taxed as a partnership. Always taxed as a corporation. No self-employment income tax on distributions. No passive activity loss restrictions. |
| Management | Must be managed by owner. May be managers managed by partner. | Can be manager managed or member managed. | Corporate management structure is fixed. Shareholders can be officers or directors. |
| Ownership | 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. | 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. | 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. |
| When to Use | Not recommended. | Own a business. To own real estate. To hold cash for asset protection. To own stock in one's corporation. | 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. |
| Benefits | There are few benefits. Higher liability and fewer tax deductions than other entities. | When owner is sued there are provisions in Nevada law to protect assets held inside of the Nevada LLC from being seized. | 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. |
| Who is taxed on the company profits? | Owner | Your choice either the owner or the Nevada LLC | Nevada Corporation |
| Double taxation? | No | No | Only if dividends are paid. You should pay salaries and bonuses instead if dividends. |
| Operating documents | None | Operating agreement |
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