There are many things to consider when starting a business and the attorneys at Law offices of J. Craig Demetras are experienced with handling your questions and providing the necessary foundation for your business structure. Here are some of the most frequent questions our office initially receives from our clients.

1. What business entity is best for my company needs? Should I form a limited partnership, an LLC, an S-Corporation, or a C-Corporation? There are a few legal structures for businesses to consider, such as a limited partnership, a limited liability company (LLC), an S-Corporation or a C-Corporation. Each type of structure has its own requirements for formation and maintaining status. A partnership, like a sole proprietorship, attaches personal liability to the owners of the business; however, a limited partnership will offer some liability protection, but this protection is limited to the amount of capital contributed by the limited partner while the general partner continues to hold unlimited liability.

The popular LLC provides member’s liability to be limited to the amount of capital contribution. An LLC is generally protected from personal liability without being required to observe corporate formalities. Unlike Corporations, LLCs are not subject to double taxation, but instead enjoy pass-through taxation, similar to partnerships or sole proprietorships. Although LLCs provide more freedom, there is in fact less legal certainty behind them because statutory and case law is less developed. Moreover, and up until recently, courts have begun to attach personal liability to members of LLCs (e.g., bankruptcy court).

A corporation is a legal entity that is separate from its owner, which generally shields that owner from personal liability. Corporations are subject to double taxation and require various formalities to maintain their status, such as conducting annual meetings, recording meeting minutes, electing directors, and issuing stock certificates.

An S-Corporation offers stockholder’s liability protection to the extent of the amount of capital contributed. S-Corporations require no more than 100 stockholders, only specific types of stockholders, and only one class of stock. On the other hand, a C-Corporation issues both common stock and preferred stock. In addition, some elect to be treated as an S-Corporation for U.S. federal income tax purposes.

A C-Corporation is the most common entity form for a public company. LLCs and limited partnerships are typically converted to C-Corporations before an initial public offering. An S-Corporation can easily be converted later into a C-Corporation (e.g., before an initial public offering).

As mentioned above, each business entity serves a specific purpose and can serve your business needs depending on what goods or services you plan to provide. Our firm is committed to offering the best legal advice on moving forward with your business.

2. Should I incorporate in Nevada? Delaware is the most common state of incorporation because of its well-developed corporate law. However, if your business is in Nevada, then it is to your benefit to incorporate where the business located. Nevada is very pro-business so if your business is in Nevada then incorporating in Nevada may be best option to save you from additional fees and complexities of incorporating elsewhere.

3. What are the biggest challenges with starting my own business? Starting a business can be very time consuming and challenging for the development of your product or service. Some challenges that our firm can assist you with are developing a business plan that addresses the proper formation, capital and cash flow, and continued legal services through our firm, as well as our firm serving as your registered agent. In addition, depending on the nature of your business, obtaining the necessary permits, licenses, or registrations for your business can be a challenge to begin operating as a legitimate a business (e.g., city and county business permits or licenses, zoning permit, Federal and State tax/employer ID’s, etc.).