Various entity types are available for those who want to incorporate. The appropriate form depends on what strategic goals are to be accomplished. Below is a chart to help illustrate the key distinctions among the various entity types. For PRIVACY, a Nevada C corporation is the answer.
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ENTITY TYPE
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OWNERSHIP
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LIABILITY OF
OWNERS
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TAX
TREATMENT
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FORMATION
DOCUMENTS
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MANAGEMENT
STRUCTURE
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CAPITAL
CONTRIBUTION
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C
CORPORATION
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Nevada C corporations may be owned by stockholders or debt holders; stock does not have to be issued; ownership is not public record
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Generally no personal liability of the owners for the obligations of the corporation
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Taxed on net income after allowable expenses (which far exceed allowable expenses for individuals)
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- Articles of Incorporation
- Bylaws
- Organizational Meeting
- Resolutions of the Board
- Stock Certificates
- Stock Ledger
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Board of Directors has overall management responsibility and officers have day-to-day responsibility
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Directors may issue stock for capital contributions or for services rendered; value of services determined by the Board of Directors
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S
CORPORATION
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Limited to 75 domestic shareholders; only one basic class of stock is allowed
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Generally no personal liability of the owners for the obligations of the corporation
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Profits and losses pass through and are taxable in the hands of the shareholders
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Same as for C corporations plus IRS (& State) S corporation election
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Board of Directors has overall management responsibility and officers have day-to-day responsibility
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Shareholders typically purchase stock in the corporation but only one class of stock is allowed
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SOLE PROPRIETOR-
SHIP
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One owner
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Unlimited personal liability for the obligations of the business
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Profits and losses of the business are profits and losses of the owner
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Fictitious Firm Name (FFN), “Doing Business As” (DBA) filing
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Sole proprietor manages the business
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Sole proprietor contributes whatever capital is needed
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PARTNERSHIP
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Unlimited number of general partners allowed
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Unlimited personal liability of the general partners for the obligations of the business
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Entity not taxed; profits and losses are passed through to the general partners
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- General Partnership Agreement
- Local filings if partnership holds real estate
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The general partners have equal management rights unless they agree otherwise
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The general partners typically contribute money or services to the partnership and receive an interest in profits and losses
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LIMITED
PARTNERSHIP
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Unlimited number of general and limited partners allowed
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Unlimited personal liability of the general partner(s) for the obligations of the business; limited partners generally have no personal liability
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Entity not taxed; profits and losses are passed through to the limited partners
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- Limited Partnership Certificate
- Limited Partnership Agreement
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The general partner manages the business, subject to any limitations of the Limited Partnership Agreement
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The limited partners typically contribute money or services to the limited partnership and receive an interest in profits and losses
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LIMITED
LIABILITY
COMPANY
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Unlimited number of “members” allowed
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Generally no personal liability of the members for obligations of the business
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Entity not taxed (unless chosen to be taxed); profits and losses generally passed through to the members
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- Articles of Organization
- Operating Agreement
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The Operating Agreement sets forth how the business is to be managed - by manager(s) or by members
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The members typically contribute money or services to the LLC and receive an interest in profits and losses
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