Generally, most new businesses are closely held between family and friends. The ownership of the stock is thus held by the closely interrelated parties. Many times these stockholders may also be a part of the company, such as when a couple college friends join together to start a business.
One key part of good prebusiness planning should be an Ownership Change in the Shareholder Agreement. The Shareholder Agreement, you could call it a premarital agreement for business partners, can establish the relationship between business partners. A Shareholders Agreement would be for a Corporation that an Operating Agreement is to LLCs.
An Ownership Change Agreement, to handle how the business will be divided if the partners want to go separate ways, can be included in the Corporations By-Laws, be a portion of a Shareholders Agreement or a stand alone document.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
A common provision in Shareholder Agreements are Buy-Sell provisions. The Buy-Sell provision controls changes in the ownership, especially under certain conditions death, divorce, personal bankruptcy of one owner, retirement of an owner or simply one participant desiring to move on to other business opportunities.
Another KEY provision of a Buy-Sell Clause would be the establishing the formula for the value of the shares. The Shareholder Agreement or Buy-Sell Agreement will address not only when ownership may transfer but more importantly show who can assume control of the shock. For obvious reasons, the initial partners/investors may want to prevent outside parties from buying in to the company to prevent control of the company being passed to 3rd party individuals. Many businesses are formed so that future generations of the founding partners can take over the business. Allowing outside investors in without planning, could jeopardize that goal.
In the event of death, divorce or incapacitation of any of the original investors/partners, the remaining partners way be forced to deal with someone that is unqualified or unable to fulfill the responsibilities for which they are suddenly thrust. If the person that they are replacing was a key employee that provided specifically trained experience, the business would be missing the knowledge that person contributed. And it is possible that the new member of the management team might have a negative affect on the remaining parties. Simply consider the affect that a spousal of an original partner who never liked (personally) any of the other original partners is now a part of the management team.
Part 2
Friday, January 24, 2014
Wednesday, January 22, 2014
Corporation Basics: Limited Liability Company (LLC) FAQ
A limited Liability Company, normally referred to as a LLC, is a business structure that is a hybrid Partnership and Corporation.
Like a Partnership or Sole Proprietorship, income is reported on the owners’ personal tax returns but like a corporation it offers protection of personal assets for business liabilities.
A few Frequently Asked Questions about LLCs are:
Question: Do I need a lawyer to form a LLC in Nevada?
No. The State of Nevada allows the forming of a LLC by submitting an Articles of Organization with the Nevada Secretary of State and paying the appropriate fees. Among the required fees are a $75 filing fee, a $125 Annual Members filing fee and a $200 State Business License fee.
Question: Do I have to pay the State Business License if I am in another state?
Yes. Regardless of where your business may be physically located, the State of Nevada requires all business entities to pay an Annual State Business License. While you may object to paying this fee, the total fees for a Nevada entity is still much less then nearly every other state and you still enjoy the benefits of Nevada’s Corporation Shield of Assets Protections.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Question: How many people do I need to form a Nevada LLC?
The State of Nevada only requires 1 person/entity to form LLC. It is not necessary that the the person/entity be a nature person. A LLC may be formed, managed and owned by one or more other LLCs, corporations or partnerships – or of course people.
Question: Do I need a Nevada Mailing Address for my LLC?
No. There is no requirement for a State of Nevada mailing address for the LLC, the Members or the Managers. The LLC is required to have a Registered Agent with a Nevada address.
Question: Am I required to file an Operating Agreement with the State of Nevada?
No. You are not required to file your Operating Agreement. However, in the event you do not have an Operating Agreement, Nevada Revised Statutes do specify certain default conditions for managing/controlling the LLC. The smarter way to handle the situation is to form an Operating Agreement in advance to keep the government out of your business. The NRS does allow, under some circumstances, that the Secretary of State’s office to demand a copy of your Operating Agreement.
Click here to set up your Nevada Corporation or LLC for $999.00, including State required filing fees, a Las Vegas Mailing address and more
Question: Can any type business be formed as a LLC?
No. There are certain businesses, such as Banks, Insurance and Trust are prohibited from be LLCs. Other businesses may also be restricted, if necessary, check with Secretary of State.
Question: What is an Operating Agreement?
An Operating Agreement is a document that establishes the parameters by which the LLC will be formed, funded and operated. It can also handle issues such as transferring of ownership interests.
Question: What are some differences between LLC and Partnerships?
The biggest difference is the handling of Debt and Liabilities. In a partnership, all partners are generally considered equally liable for all the debts of the partnership regardless of which partner is responsible for incurring the debt. With a LLC, the members/owners are limited in their liabilities to the extent of their investment – protecting their personal assets from business debts. When it comes to taxation, LLCs and partnerships may be handled in nearly identical manners with the income being passed to the members for taxation on their personal income tax filings. The LLC, however, can have other flexibilities in the handling of profit through the use of the Operating Agreement to assign different percentages of profit to different members. LLCs also can enjoy many business expense tax deductions that are enjoyed by corporations.
Question: Are LLCs better then Sole Proprietorships?
Both have their advantages. The decision is a business management, a personal liability and a tax decision that should be considered carefully with the help of professionals - tax professionals and legal professionals.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Like a Partnership or Sole Proprietorship, income is reported on the owners’ personal tax returns but like a corporation it offers protection of personal assets for business liabilities.
A few Frequently Asked Questions about LLCs are:
Question: Do I need a lawyer to form a LLC in Nevada?
No. The State of Nevada allows the forming of a LLC by submitting an Articles of Organization with the Nevada Secretary of State and paying the appropriate fees. Among the required fees are a $75 filing fee, a $125 Annual Members filing fee and a $200 State Business License fee.
Question: Do I have to pay the State Business License if I am in another state?
Yes. Regardless of where your business may be physically located, the State of Nevada requires all business entities to pay an Annual State Business License. While you may object to paying this fee, the total fees for a Nevada entity is still much less then nearly every other state and you still enjoy the benefits of Nevada’s Corporation Shield of Assets Protections.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Question: How many people do I need to form a Nevada LLC?
The State of Nevada only requires 1 person/entity to form LLC. It is not necessary that the the person/entity be a nature person. A LLC may be formed, managed and owned by one or more other LLCs, corporations or partnerships – or of course people.
Question: Do I need a Nevada Mailing Address for my LLC?
No. There is no requirement for a State of Nevada mailing address for the LLC, the Members or the Managers. The LLC is required to have a Registered Agent with a Nevada address.
Question: Am I required to file an Operating Agreement with the State of Nevada?
No. You are not required to file your Operating Agreement. However, in the event you do not have an Operating Agreement, Nevada Revised Statutes do specify certain default conditions for managing/controlling the LLC. The smarter way to handle the situation is to form an Operating Agreement in advance to keep the government out of your business. The NRS does allow, under some circumstances, that the Secretary of State’s office to demand a copy of your Operating Agreement.
Click here to set up your Nevada Corporation or LLC for $999.00, including State required filing fees, a Las Vegas Mailing address and more
Question: Can any type business be formed as a LLC?
No. There are certain businesses, such as Banks, Insurance and Trust are prohibited from be LLCs. Other businesses may also be restricted, if necessary, check with Secretary of State.
Question: What is an Operating Agreement?
An Operating Agreement is a document that establishes the parameters by which the LLC will be formed, funded and operated. It can also handle issues such as transferring of ownership interests.
Question: What are some differences between LLC and Partnerships?
The biggest difference is the handling of Debt and Liabilities. In a partnership, all partners are generally considered equally liable for all the debts of the partnership regardless of which partner is responsible for incurring the debt. With a LLC, the members/owners are limited in their liabilities to the extent of their investment – protecting their personal assets from business debts. When it comes to taxation, LLCs and partnerships may be handled in nearly identical manners with the income being passed to the members for taxation on their personal income tax filings. The LLC, however, can have other flexibilities in the handling of profit through the use of the Operating Agreement to assign different percentages of profit to different members. LLCs also can enjoy many business expense tax deductions that are enjoyed by corporations.
Question: Are LLCs better then Sole Proprietorships?
Both have their advantages. The decision is a business management, a personal liability and a tax decision that should be considered carefully with the help of professionals - tax professionals and legal professionals.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Which is better: a LLC, a C-Corporation, a S-Corporation or a Partnership?
Almost daily, the question is asked by new business owners – Which is better: a LLC, a C-Corporation, a S-Corporation or a partnership?
There is a real easy and simple answer. If there was only one BEST way, there would be only ONE way. However, just as there are many things to consider when preparing a dinner salad, there are many things to consider at establishing your business entity.
The are literally 100s if not 1000s of business variations, but most fall into five (5) main groups:
Click here to set up your Nevada Corporation or LLC for $999.00, including State required filing fees, a Las Vegas Mailing address and more
Let us first throw out Sole Proprietorship and Partnerships from this discussion as they are covered elsewhere. And normal, run of the mill C Corporations are way to complex to operate for most new business owners.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
With a LLC: profits can be divided disproportionately, meaning one owner/member can receive a larger percentage of the profits because maybe their work is more valuable. A S-Corp can only have one class of stock so all owners are paid the same dividend rate. (One owner may have more shares and thus have a bigger check, but they have more stock invested.)
With an LLC, the members and/or managers can be other filed entities: i.e. Corporations, other LLCs, Trusts, Partnerships and real people. By restriction, stockholders of S Corporations can only by US Citizens. The LLC can be owned by foreign nationals but S-Corps can not.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
There is a real easy and simple answer. If there was only one BEST way, there would be only ONE way. However, just as there are many things to consider when preparing a dinner salad, there are many things to consider at establishing your business entity.
The are literally 100s if not 1000s of business variations, but most fall into five (5) main groups:
- Sole Proprietorship: A single owner/manager who does it all.
- Partnership: From two to unknown joint owners/investors/co-operators/co-managers.
Partnerships them self have many different sub-styles. - Corporations or C-Corp: A stockholder owned business entity that is afforded many business operating and tax advantages. The corporation exists as it’s own entity and is responsible for paying taxes on any income. The stockholders may or may not be managers or employees of the company.
- S Corporation or S-Corp: Also a shareholder owned entity but with the unique tax provision of passing income to the shareholders where they pay taxes on their personal tax returns as opposed to the corporation paying the taxes before distributing the profits.
- LLC or Limited Liability Company: A unique business entity that combines the personal liability protection of a Corporation, with the pass thru income features of a S Corp with the simpler management and operation of a partnership.
Click here to set up your Nevada Corporation or LLC for $999.00, including State required filing fees, a Las Vegas Mailing address and more
Let us first throw out Sole Proprietorship and Partnerships from this discussion as they are covered elsewhere. And normal, run of the mill C Corporations are way to complex to operate for most new business owners.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
With a LLC: profits can be divided disproportionately, meaning one owner/member can receive a larger percentage of the profits because maybe their work is more valuable. A S-Corp can only have one class of stock so all owners are paid the same dividend rate. (One owner may have more shares and thus have a bigger check, but they have more stock invested.)
With an LLC, the members and/or managers can be other filed entities: i.e. Corporations, other LLCs, Trusts, Partnerships and real people. By restriction, stockholders of S Corporations can only by US Citizens. The LLC can be owned by foreign nationals but S-Corps can not.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Do I need a Registered Agent?
Do I need a Registered Agent?
Yes!
In the State of Nevada, all business entities (including corporations or LLCs) registered with the Nevada Secretary of State are required to have a current and valid Registered Agent at all times. The Registered Agent must be physically located in the State of Nevada and they must be available to receive service of process (notice of litigation). The use of a mail box, such as UPS Stores or Postnets are not acceptable. Many such businesses also provide this service, but using their mailbox is not acceptable by Nevada's regulations.
The Registered Agent is NOT an officer of the company if they are only the R/A. Their sole purpose is to be available during normal business hours in the event of Legal Process Service (such as your entity is sued or subpoenaed for a court process). That is not to say that an Officer or other employee of the company can not be the R/A. But, by definition, the Registered Agent is not an officer in the traditional reference such as President, Vice-President, Treasurer and Secretary.
If the Board of Directors desire, an officer of the company can also function as the R/A, as long as they physically reside with in Nevada. Out of state based companies will need a 3rd party person or entity to be their R/A. Nevada companies can use a third party or have a member of their staff fill the function.
Another erroneous mistake is that the Registered Agent can comply with Nevada law if they have mailing address, such a mailbox, in Nevada while they personally live in another state (or even another country). This is not permitted. Your agent must be in Nevada as a normal course of their employment or residence.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
There are some services that offer discount or even free Registered Agent services. Before you sign up with these service providers, ask yourself a question – how can they provide FREE services? They have to be in business to make money – just like you – so how can they be giving away their services? Somewhere, somehow, someway they have to be making money and that is often with hidden charges or bait-and-switch marketing that will cost you more money in the long run. The other concern is how long have they been in business?
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Your Registered Agent is NOT a member of your management team and they are NOT an employee of the company - but they ARE a critical contractor to your company that can save you a lot of time and money as long as you select a professional and honest one.
Yes!
In the State of Nevada, all business entities (including corporations or LLCs) registered with the Nevada Secretary of State are required to have a current and valid Registered Agent at all times. The Registered Agent must be physically located in the State of Nevada and they must be available to receive service of process (notice of litigation). The use of a mail box, such as UPS Stores or Postnets are not acceptable. Many such businesses also provide this service, but using their mailbox is not acceptable by Nevada's regulations.
The Registered Agent is NOT an officer of the company if they are only the R/A. Their sole purpose is to be available during normal business hours in the event of Legal Process Service (such as your entity is sued or subpoenaed for a court process). That is not to say that an Officer or other employee of the company can not be the R/A. But, by definition, the Registered Agent is not an officer in the traditional reference such as President, Vice-President, Treasurer and Secretary.
If the Board of Directors desire, an officer of the company can also function as the R/A, as long as they physically reside with in Nevada. Out of state based companies will need a 3rd party person or entity to be their R/A. Nevada companies can use a third party or have a member of their staff fill the function.
Another erroneous mistake is that the Registered Agent can comply with Nevada law if they have mailing address, such a mailbox, in Nevada while they personally live in another state (or even another country). This is not permitted. Your agent must be in Nevada as a normal course of their employment or residence.
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
There are some services that offer discount or even free Registered Agent services. Before you sign up with these service providers, ask yourself a question – how can they provide FREE services? They have to be in business to make money – just like you – so how can they be giving away their services? Somewhere, somehow, someway they have to be making money and that is often with hidden charges or bait-and-switch marketing that will cost you more money in the long run. The other concern is how long have they been in business?
Get a complete, turnkey Nevada Corportion or LLC in a little as 2 business days.
Your Registered Agent is NOT a member of your management team and they are NOT an employee of the company - but they ARE a critical contractor to your company that can save you a lot of time and money as long as you select a professional and honest one.
Subscribe to:
Posts (Atom)