Divorce Info by State or Country

Types Of Corporations

C-Corporation

A C-Corporation is the most common corporate structure. It offers a large array of benefits including increased asset protection, an unlimited number of stockholders and many tax benefits. A Corporation is regulated and governed by the state in which it is formed. As a business owner you need to seriously consider which state you incorporate in. For preferred states, such as Nevada, you can take advantage of the following benefits:

• Superior corporate veil (asset protection)
• Enhanced privacy laws
• No business tax
• Fringe benefits

S-Corporation

Corporation may elect to be recognized as S-Corporation after they are formed to take advantage of a special tax status with the IRS. Often small business owners choose this option if they prefer to be taxed as if they were a sole entrepreneur or partnership but still want the asset protection a
corporation provides.

Entrepreneurs elect the S-Corporation to help reduce seif-employment taxes and to avoid double taxation than occurs with regular C-Corporation. The disadvantage of an S-Corporation is that it doesn’t allow for many of the fringe benefits that a C-Corporation does. There are also some restrictions as to who can file for S-Corporation status.

Limited Liability Company (LLC)

Although the LLC is not a Corporation, it provides many of the same benefits as a Corporation. This is another option that is often attractive to small businesses because it provides the limited liability benefits of a Corporation with the “pass-through” taxation of a sole proprietorship or
partnership. In addition, unlike a Corporation, members of an LLC have the ability to control other member’s ability to transfer ownership by voting power of their membership.

Last but not least, the ownership restrictions subject to S-Corporations are not applicable to the LLC making this structure ideal for foreign investors.

And most important, a Nevada LLC provides excellent asset protection. If a creditor were to take ownership of a member’s interest in a Nevada LLC, the LLC can:

Declare a K-1 distribution to the IRS that would require the creditor to pay tax on the distribution, even though the profits were not actually distributed to the creditor.

For this reason most attorneys will not have their creditor client place a lien on a member’s ownership interest of a Nevada LLC because of the creditor’s potential tax obligation. A lien on a Nevada LLC only results in what is called a “charging order”, which only gives the creditor rights to any distributions made by the LLC to that particular member, but little else.

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