How To Incorporate Nevada
LLC or S-Corp? Nevada or Delaware?
I am thinking about developing an ad agency? Should it be an S-Corp or LLC? I know with an S-Corp you need to keep track of meetings etc. Is there a benefit? Also, which is prefered to incorporate in Nevada or Delaware? I live in Nevada? Any tax benefits?
While the above Answerer is correct that both an S-corp and an LLC, unlike a C corp avoid entity level taxation, an LLC is not an entity for which you make an S corp election. You make another election, referred to casually as a “check the box” election in which you indicate whether you want to be treated as a partnership or a corporation.
Both an LLC and a S corp offer limited liability and both avoid double taxation. However, an S corp is a corporation so you need to have an annual meeting, a board of directors, etc., etc.. This means you nee to keep minute books. In addition, S corp.’s can only have one class of stock and can not have foreign owners.
On the other hand, LLCs have greater flexibility — you can have different class of membership interests (in an LLC you don’t hold shares, you hold membership interests) and a wide variety of organizational and economic structures. However, LLCs require both a filing with the state and a written operating agreement so in some sense starting up an LLC is a little more complicated (though you could have a fairly simple LLC agreement). You might know a number of small businesses who have LLCs but never bother to create an operating agreement — you may do so but that is a mistake and its actually not a good practice.
Also note that if you are the only member of an LLC, while most LLCs are treated as partnerships, no partnership can exist with just one member, so it is technically a disregarded entity for tax purposes.
In terms of incorporation, I agree with the poster above that Nevada is likely a better choice. Delaware remains a superior jurisdiction for sophisticated entities where Boards of Directors and companies want greater certainty as to what constitutes satisfaction of various fiduciary duties to their shareholders in takeovers and other situations, but for most normal small businesses Delaware is not a real advantage. In addition, if you incorporate outside the state where you do business, you will likely need to “qualify to do business” in Nevada anyway, which means extra paperwork and cost.
My recommendation is that you do a Nevada LLC. Use a lawyer or, if its a single member LLC, find a simple operating agreement and make sure you coordinate with your tax accountant to make the proper election.
Good luck.
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