Forming an LLC in Nevada: Advantages and Disadvantages

forming an llc in nevada advantages and disadvantages

Are you planning to start your own business? Maybe it’s time to put your years of experience to work and finally venture out on your own. If you have found yourself in this position, there are a lot of factors that you will need to consider before opening your doors for business. Aside from developing a business plan, one of the most important aspects to determine is where you will be setting up shop. The state of Nevada, known best for the bright lights of Las Vegas and Reno, is also a rather business-friendly state. In truth, if you are interested in forming an LLC, you could do much worse than doing so within the confines of the Silver State.

While forming an LLC in Nevada has many advantages, it is also not without some notable drawbacks. By understanding all of the pros and cons, you will be better able to make an informed decision about structuring your business.

forming an llc in nevada advantages and disadvantages

Advantage: Limited Liability

One of the most appealing aspects of forming a limited liability company is seen right in the name. “Limited liability,” as a concept, can be hugely beneficial to Nevada business owners. For any business, the possibility of failure is always present. No matter how solid you may believe your business plan to be, a swing in the market could cause debts to pile up, eventually leading you to bankruptcy. In such a situation, assets can be seized to recoup on your debts, putting your own personal financial stability in jeopardy.

Unless, of course, you have an LLC. Limited liability means that your personal assets are shielded from bankruptcy or legal judgements against your business. By establishing your business as its own entity, you can safely avoid the ruinous financial consequences of lawsuits against your business.

Disadvantage: Complexity

Managing a business calls for significant amounts of time and energy. Between navigating day-to-day operations, hiring employees, and dealing with taxes and payroll, business owners tend to have a lot on their plate. One disadvantage about LLCs in Nevada is that they can be fairly complex. There are fairly strict state registration requirements that you will need to adhere to, which means that you will have to anticipate dealing with some paperwork.

Advantage: Tax Implications

Taxes are simply an unavoidable aspect of life. As a financially savvy business owner, your aim should be to limit your tax liability as much as possible. This allows you to put your profits back into growing your business and give your employees more competitive wages. One of the reasons that LLCs are so heavily favored by Nevada entrepreneurs is that the Internal Revenue Service (IRS) treats them as “pass-through” entities. That means that when your business generates profits they are not taxed until they pass through to the members of the LLC, who in turn pay taxes on their own income.

This advantage is shared by limited liability partnerships (LLP) as well. Conversely, corporations can find themselves effectively taxed “twice,” though their structure can still make sense for certain types of businesses. 

Disadvantage: Stock Limitations

Sometimes, for your business to continue to grow and thrive, you have to raise capital. This is often done by finding investors who believe in your vision and are willing to put money up front for a return with interest down the road. As it can be difficult and inconsistent to try and net individual investors regularly, however, many corporations opt to issue stock. Known to quickly generate cash, issuing stock to shareholders is commonplace in the business world.

Unfortunately, an LLC cannot issue stock. Anyone who invests in an LLC would need to become a member, which can quickly become a bureaucratic headache. As they are seen as risky bets when compared to corporations, investors tend to shy away from limited liability companies.

We Can Help You with Forming an LLC in Nevada

After weighing the pros and cons, you may well determine that a limited liability company is still right for your business. Even with their disadvantages, LLCs are still a smart choice for many–the tax and liability incentives alone can make them worth it. If you wish to proceed with setting up your own limited liability company, you will have to complete a couple of steps.

First, you will need to choose a unique name for your business. You will also need to appoint a registered agent who will be tasked with receiving and service of process on behalf of your business. Lastly, you will need to submit the proper forms and documentation to the Nevada Secretary of State’s office.

At the Corporation Center, we can help you streamline this process. Using our easy-to-fill web forms, you can submit your LLC registration online in just a matter of minutes. To learn more about how we can help you, contact one of our helpful customer service representatives by phone or email today.