Corporation Makers
Your Expert Source For Nevada & California Corporations & LLC's, for both incorporating and forming  

Business Ownership Choices

Is a Corporation Structure right for you?

You have a choice on how to set up your business operations. There are four fundamental options:

  1. Sole Proprietorship

    This is an un-incorporated business owned by one individual. It is the simplest form of business organization. The business does not exist apart from the owner. The owner assumes the risks of the business to the extent of his/her personal assets, even if those assets are never used in the business. Why then do people elect this option? Because it's so easy to organize and the owner has maximum freedom. There are few legal details to handle and the owner reaps all the benefits. It's also very easy to cease activities.

    On the other hand, the owner is obligated for all the debts. Creditors can have a feeding frenzy on personal assets to satisfy any debts. It is also extremely difficult to obtain any financing.

  2. Partnership

    A partnership is a relationship between two or more persons who join together to carry on a trade or business. Each person contributes in some fashion and each shares in the profits and losses.

    The advantages of the partnership include: ease of organization and greater financial strength than a sole proprietorship. The partners collectively offer an advantage of more available skills. A partnership does possess legal status. Each partner has an interest in the business. Among the major disadvantages are; the liability of the partners is usually unlimited, and authority for decisions is divided.

    A related entity known as the Limited Partnership or Limited Liability Company(LLC) can be formed to limit the financial exposure of owners. With this structure, funds can be obtained from investors while depriving them of any management role. In this situation, the General Partners, who actually operate the business assume most of the legal and financial responsibility. Investor risk is minimized. The LLC is a hybrid of partnership and corporation. It is now recognized in all states but has some significant drawbacks:

      1.  untested legal issues
      2.  existence is limited to 30 years
      3.  considerable administrative details regarding membership, and others. We do offer this form of business.

  3. Corporation

    A corporation is a unique entity. It has a life separate from its owners and has rights and duties of its own. The owners of a corporation are the stockholders. Managers may or may not be stockholders. Some advantages of a corporation are;

    • the life of a corporation is perpetual
    • stockholders have limited liability
    • ownership transfer is easy
    • there is an improved ability to raise capital
    • the structure works well for small or large businesses.

    Disadvantages include a potential for double taxation of income. However, Sub Chapter S Corporations can circumvent this drawback (our kit provides the forms and instructions to easily elect this status). Corporations are more complicated to organize than the other forms of ownership. Business activities must comply with the corporate charter. State and federal controls must be followed.

    In view of the progress made by several states, particularly Nevada, to meet the needs of modern business conditions, we feel that the corporate entity is the best practical choice for safe operation in today's marketplace. The other options expose too much unnecessary risk to your family's home, your child's college education, and your other valuable assets. You and your family need not be personally subjected to losses arising from business misfortunes, especially in today's lawsuit inclined society. If unforeseen business problems arise, (AND THEY DO), you and your family can have confidence in the security of your personal possessions.

    As a corporation, you are required to comply with state and federal regulations. Those tasks have become easier to manage and actually aid you by encouraging good business practices. Our Deluxe Kit makes it even easier to master the steps of proper corporate behavior.

  4. Limited Liability Company (LLC)

    Limited Liability Companies originated in Wyoming and are now accepted in all states. The LLC is a hybrid entity. It joins the liability protection offered by a corporation and the tax benefits provided by a partnership. Favorable rulings by the IRS have made LLCís an attractive alternative to the corporate entity. However, it is important to determine which entity will serve a business situation best. The LLC may not be your best solution. The "C" corporation and "S" corporation entities should also be considered.

    Things to consider:

    1. Member/Owner information can become available to the public.
    2. Who will run company. It may be operated by managers or members.
    3. Number of owners/members. Large number makes this form of entity unwieldy.
    4. Business life expectancy. States still limit life to 30 years.
    5. Memberís life expectancy. If members leave or die, agreements must exist for replacement, continuation or termination of LLC.
    6. Preparation and approval of an operating agreement. This document should spell out the business activity, member relationships, management, tax provisions, distributions of funds and assets, etc. Corporation Makers does provide a sample agreement with each order.

Corporation/LLC Comparison

Ownership Members Shareholders
Ownership change Unanimous consent Stock transfer
Management Members/Managers Directors
Liability Protected Protected
Owner leaves/dies Possible dissolution No impact
Paperwork Operating Agreement Annual meeting
Type of business Almost any type Almost any type
Tax liability Members Corporation/
Shareholders if S corporation