Frequently Asked Questions
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A corporation is formed by filing Articles of Incorporation with the Secretary of State. The State of Nevada when it accepts the Articles issues a Corporate Charter. Once the corporation is chartered, it may then go about the business of getting itself organized. The Articles of Incorporation must contain the name and address of at least one director.
Types of Corporations
General Corporation
Regulated by NRS78 a general corporation is the most common type of business entity. A corporation is owned by stockholders. A stockholder's personal liability is limited to the amount of their investment. The corporation's existence is eternal as long as it is in good standing within the jurisdiction that it exists. This is the entity that the great majority of clients form. The disadvantage mentioned by those not familiar with corporate strategies of a "C" corporation is the possibility of being taxed twice. Once at a corporate level, and once again at the individual rate, if the Corporation pays the individual by issuing a dividend. However, if dividends are not declared, there is no double taxation problem.
The board of directors are responsible for managing the affairs of the corporation. Usually, directors make only the major business decisions and supervise and appoint the officers who make the day-to-day business decisions of the corporation. Officers are responsible for the everyday management of the corporation. Typically, officers are appointed directly by the board of directors. It is important to note that a shareholder may serve on the board of directors and as an officer. In fact in Nevada one person is enough to form a corporation.
Your corporate expenses may include automobiles, planes, home offices and equipment, cellular phones, business travel, business meals, medical, dental, and optical benefits, tax deferred retirement plans for the officers of the corporation are all among the many legitimate pre-tax expenses allowed corporations.
What is a Resident Agent and Why Do I Need One?
The primary purpose of a Resident Agent, is to maintain a continuous corporate presence in the state of incorporation. Specifically, it provides for a physical address for any legal papers to be delivered in the event the corporation is involved in any litigation or needs to receive a verifiable notice of any kind. In Nevada, the registered agent must keep a copy of the articles of incorporation, a copy of the corporate bylaws, and the stock ledger of the company or a statement that provides the name and address of the actual custodian of the stock ledger.
May a company use its Nevada Resident Agent's address as its own business address within the state of Nevada?
NO, unless the Nevada Resident Agent specifically permits a corporation to do so and proper paperwork is filed. A company's Nevada Resident Agent address should not be used as your corporation's business address unless it actually is your business address in Nevada.
What do the terms "articles, bylaws, meeting or minutes" mean?
Articles of Incorporation: The Articles of Incorporation are the primary legal document of a corporation; it serves as a Corporation’s constitution. The articles are filed with the proper state government to begin corporate existence.
Organization meeting: The organizational meeting completes the formation of the Corporation. At the organizational meeting a number of initial tasks are completed such as: the articles of incorporation are ratified, the initial shares may be issued, officers are elected, Bylaws approved, and a resolution authorizing the opening of bank account is passed. If the initial directors are named in the articles of incorporation, they can hold the organizational meeting. If they are not named, then the organizational meeting is held by the incorporator.
Bylaws: Bylaws are rules and regulations adopted by a Corporation for its internal governance. It usually contains provisions relating to shareholders, directors, officers and general corporate business. At the corporation’s initial meeting the bylaws are adopted. Bylaws are a private document not filed with any state authority.
Minutes: The Board of Directors and shareholders transact business at meetings, with decisions being typically made by majority vote. Certain formalities must be followed in holding Board of Director and shareholder meetings. The meetings must be held pursuant to notice. Notice may be waived if the waiver is done in writing.
Do I have to have an actual address in Nevada?
Yes, you do need an address for your business to be in Nevada.
Do you have to have a bank account in Nevada?
Yes, you do need a Nevada bank account for your business in Nevada. You are free to do business and open a bank account in any state or country in the world but you should maintain a bank account in Nevada as well.
What else do I have to pay after the set up fee and for what? Are there any other costs involved?
Every company in Nevada is required to file the form called "Initial List of officers and directors. The fee for the first and following years is $125. The $125 fee is not included in incorporation fee (it is paid directly to the Secretary of State). The Initial List MUST be filed on or before the first day of the second month following the filing date. Example: If corporation filed on October 15, 2003 the list must be filed by December 1, 2003.
What is the difference between INC and LLC?
LLCs and Corporations have many of the same characteristics. The most important characteristic they share is that they both offer limited liability protection to its owners. Typically, shareholders are not liable for the debts and obligations of the corporation; thus, creditors will not come knocking at the door of a shareholder to pay debts of the corporation. In a partnership or sole proprietorship the owner's personal assets may be attached to pay debts of the business. With an LLC, the members are not personally liable for the debts and obligations of the corporation either.
There are many important differences between the corporation and LLC. The entities are taxed differently. An LLC is a pass-through tax entity. This means that the income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is "passed through" the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns.
With a standard C-corporation, the corporation is a separately taxable entity. Corporations are treated as a separate legal taxable entity for income tax purposes. Therefore, corporations pay tax on their earnings. If corporate earnings are distributed to shareholders in the form of dividends, the corporation does not receive the reasonable business expense deduction, and dividend income is taxed as regular income to the shareholders. Thus, to the extent that earnings are distributed to shareholders as dividends, there is a double tax on earnings at the corporate and shareholder level. However, this should not be a problem for smaller corporations.
What is the difference between a "C" and an "S" corporation?
All corporations start life as "C" corporations. As a benefit to small businesses, which meet certain criteria, the Internal Revenue Service allows them to apply (via form 2553) for "S" status. This means that the corporation will be taxed similarly to a partnership, with each shareholder reporting the profit or loss of the corporation on his personal tax return, in proportion to the percentage of shares he holds. This means that if there is a loss the shareholder can use it to offset his other tax obligations. If there is a profit it is taxed once, at the individual's tax rate, rather than twice (a "C" corporation will pay a tax on profits and individual shareholders will be taxed again when those profits are distributed as dividends.)
Are there any drawbacks to being an "S" corporation?
The main negatives are the restrictions. There cannot be more than 35 shareholders; non-resident or non-US citizens may not be shareholders; and the tax year is somewhat inflexible (it usually must end on December 31st). Additionally, another corporation cannot own an “S” corporation.
What is the difference between an "S" corporation and a Limited Liability Company?
In terms of reporting income, they are quite similar. The LLC is somewhat less restrictive than the "S" corporation. There can be any number of members and there are few restrictions on who those members may be.
Are directors and officers names a matter of public record?
Yes. Names and addresses are filed with the state and are therefore available to anyone. Nevada requires this filing annually. They do not require notification of intervening changes. However, Nevada allows for the use of "nominee" officers and directors. These are "stand in" officers and directors which are listed on the public record instead of you. Our Nominee Service places one of our personnel on the public record and by contract, provides you with complete control of your corporation and sole signatory rights to your bank account.
What are the directors' and officers' corporate liability?
Under normal circumstances, officers, directors, managers, etc. do not have personal liability for lawful acts of the corporation. In addition, according to Nevada Statutes, the owners, officers and/or directors are not the “appropriate” party to a lawsuit. The company may also indemnify any officer, director, manager, etc. from personal liability.
Can my corporation conduct business in other states?
Yes! Citizens of other states and foreign countries are able to own and operate a Nevada corporation. They are welcomed and encouraged to do this. You can live anywhere in the world, it's no problem. Nevada law does not require your shareholders or directors meetings to ever be held in Nevada. However, when doing business in another state, your corporation must comply with local laws and licensing of the state in which it does business.
What is a Federal Employer Identification Number?
Once the corporation has been formed and is ready to do business, it is the time to apply for a federal employer identification number (EIN). Generally, any corporation doing business within the U.S. is required to have an EIN. In fact, the EIN is necessary when filing tax returns and for establishing bank accounts.
A corporation can receive an EIN by completing and submitting IRS Form SS-4. However, you can have Priority Services Group save you this tedious and time consuming paperwork by completing and submitting the necessary EIN form on your behalf.
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