Nevada State Corporations: The Choices

September 25, 2004
By Richard Smith

Nevada state law acknowledges two main forms of Nevada state corporations, and two peripheral forms of state corporations. In order, these are:

The ‘C’ Corporation
Unless otherwise designated as being ‘S’ corporations (see below), all corporations that incorporate under Nevada state law are, by default, designated as ‘C’ corporations. As such, once the incorporator of the corporation has filed the Articles of Incorporation (and its supporting documents) with the Secretary of State for Corporation, a ‘C’ corporation would have been incorporated.

The ‘S’ Corporation
As there is no state imputed corporate income tax in Nevada, Nevada does not assume that an ‘S’ corporation is being incorporated unless the incorporator undertakes the additional measure of filing the relevant forms with the Internal Revenue Service for Sub Chapter ‘S’ status.

‘S’ corporations provide the liability protection of ‘C’ corporations, but are taxed as if they were a partnership (with the follow through concept – one taxation methodology). Consequently, from a Nevada state point of view, there are no implications between a ‘C’ corporation and an ‘S’ corporation – although there may well be federal reasons for incorporating as such.

Unlike ‘C’ corporations, which rarely tag themselves as ‘C’ corporations, ‘S’ corporations are ordinarily required to state themselves as being such an entity. Notwithstanding this, ‘S’ corporations are required to maintain proper records and meetings as if they were a ‘C’ corporation.

Professional Corporations
Nevada state law now acknowledges the concept of a ‘professional’ corporation provided that all the members of the corporation are members of that profession. Nonetheless, although professional corporations can carry-on their business in a similar vein to other Nevada state corporations, they cannot limit any liability they may have to third parties as a result of any malpractice suit commenced. Nor are they permitted to have shareholders that are not members of the profession.

Limited Liability Company (LLC)
Nevada state law provides LLCs, including single member LLCs, with all of the benefits of a regular corporation, but with no separate taxation issue. Under Nevada state law, LLCs are not taxed on profit. Consequently, LLCs, including single member LLCs, can afford themselves of the privileges of ‘S’ corporations, whilst maintaining a status similar to that of a partnership.