Limited Liability Companies (LLCs) have become popular for most entrepreneurs looking to build their business structure.
An LLC is a business structure that protects business owners like you from the liabilities of running a business. It provides significant asset protection to its members, allowing them to safeguard their assets should the LLC face legal or financial challenges.
But aside from asset protection, what other benefits do LLCs have that make them the preferred choice?
If you’re curious about the advantages of a limited liability company in Nevada, you’ve come to the right place.
This blog will discuss what makes LLCs such an appealing structure for entrepreneurs. We’ll also explore how its asset protection works and the other benefits that it offers.
Read on to learn what makes LLCs a great choice for small businesses.
LLCs & Asset Protection
Asset protection is one of the primary reasons why limited liability companies are popular among entrepreneurs.
According to law, LLCs are treated as distinct legal entities. They’re responsible for their own debts and legal obligations. Any liability they incur will not affect their owners.
This structure allows entrepreneurs like you to safeguard their assets from being seized to settle judgments or claims. If someone decides to sue your LLC, creditors can only go after its assets. They’re not allowed to pursue your personal holdings.
While it’s true that other structures offer asset protection, there are other unique benefits to an LLC.
Advantages of Limited Liability Companies in Nevada
Aside from asset protection, there are plenty of other advantages to forming an LLC, such as:
Pass-Through Taxation
LLCs are classified as pass-through entities for tax purposes. This tax status is great because it helps you avoid double taxation effectively.
Unlike corporations, LLCs don’t have to pay corporate income taxes. All that they earn and lose goes straight to their owners, who must report them in their individual tax returns.
Moreover, LLCs are allowed to choose their preferred tax status. Single-member LLCs can be taxed as a sole proprietorship, while multi-member LLCs can adopt the general partnership tax status.
Unlimited Members
Unlike corporations, limited liability companies can have as many members as they want. There’s no limit to the number or kind of members an LLC can have. This enables them to invite potential investors.
For instance, if you started your LLC with a partner and invited an investor later on, you can easily change your LLC’s ownership structure to accommodate the new member.
Perpetual Existence
LLCs have perpetual existence unless their Articles of Organization say otherwise. Even if the LLC owners change, the transition won’t trigger the dissolution of the company. The same rule applies when a member retires or withdraws from the company.
In most states, LLCs can only be dissolved if:
- An event specified in the LLC’s operating agreement occurs.
- All LLC members agree to a dissolution.
- A judicial or administrative action calls for the dissolution of the LLC.
Distribution Flexibility
Another excellent benefit to a limited liability company is distribution flexibility. LLCs are allowed to determine how they will distribute their profits. They’re not required to divide income equally, like general partnerships.
You can customize your LLC’s profit distributions based on factors like contributions, ownership percentages, and other similar criteria outlined in your operating agreement. This flexibility means you can tailor your profit distributions according to your needs and preferences.
Minimal Paperwork
Starting an LLC is relatively easy. You don’t have to deal with a lot of paperwork. All you have to do is submit your operating agreement and articles of organization to your Secretary of the State.
Additionally, the formation fees for LLCs are also relatively low in most states. For example, California’s filing fees are $70, while Delaware is $90.
Fewer Regulations
Limited liability companies in Nevada have fewer compliance regulations than other business structures. They’re not required to hold annual meetings with shareholders, nor do they need to record minutes of their meetings.
Most states only require LLCs to submit annual reports and to have a registered agent who will receive all the company’s correspondence.
Transferability of Membership Interest
LLC membership interests are divided into two parts: financial and management rights. Financial rights refer to a member’s right to receive distributions from the company. Meanwhile, management rights are their rights to participate in the management of the LLC.
LLC members can be easily transferred as they are considered personal property. However, management rights can only be handed over with the remaining members’ consent.
Credibility
Lastly, limited liability companies can help small business owners like you build credibility. Forming an LLC is crucial in establishing a professional and credible image for your small business.
It shows your potential clients, partners, and investors that you are serious about your business and committed to its long-term success. Creating an LLC shows that you’ve taken the time to formalize your business structure.
Build Your LLC Today
Running a successful business goes beyond selling products or getting clients. You also have to ensure that your business is structured to align with your needs and goals. This way, you can navigate challenges confidently and achieve long-term sustainable growth.
Start building your limited liability company in Nevada today, and let NCH guide you. NCH is one of Nevada’s leading business formation service providers, ready to assist you in establishing your venture.
To learn more about NCH’s services, visit their website here or contact them at 1-800-508-1729.