Hello, this is the trusted podcast and I am your host, Blake Johnson. Thank you for listening in today. And what we’re going to talk about today is how, uh, our theme considerations you need to have when starting a business Trust Attorney Las Vegas. So what type of entity should you pick? Um, other things you should be aware about from a legal standpoint. So if you were to start a business tomorrow, what would you need? Um, you know, you’d probably need an office or store front location. You need equipment to um, you know, actually do, do the work. Uh, you may need some staffing to help with the, you know, front desk, take calls or you know, do the work for you. Uh, you’re gonna need some capital to pay those people and buy the equipment and do all of those things. Uh, bank accounts. Um, you’re gonna need paying customers or clients.
Uh, you’re gonna need to do some marketing and advertising to get your name out there. And if it’s, you know, a specific industry you’re in, there may be a specific licensing and degrees that you may need to hold in order to start that business. And, uh, get things, uh, often the right foot. So, um, you also may need, um, you know, the, the licenses for the city. You know, like here I’m in Las Vegas, so Las Vegas city has licenses if you’re in the S uh, the proper city. Um, you also have County licenses if you’re operating outside of the city, but within the County. So that’s Clark County for us here in Nevada, um, in, in Las Vegas area. And then you’re also going to have state business licenses. So, um, you have to register with the state. That’s usually how you create the business entity that you want. And, um, then you see of it that state business, possibly a County license, possibly a city license and other types of things.
You’re also going to have, uh, you know, insurance needs. Um, you know, uh, renters insurance if you have a, if you’re renting a place, you’ve also got your general liability for the business Trust Attorney Las Vegas. If you have employees, you got workman’s comp. If you’re a specialist, you have malpractice insurance. So a lot of costs go into that. Uh, you want a really good accountant to help you make sure you’re on track, especially with taxes. As those come up. Um, you may need somebody to run payroll, you’ve got employee benefits, um, that you may need to set up and, um, you know, scheduling software or you know, other things to make sure you’re complying with all the necessary requirements. So that’s sounds like a lot and it is, and you don’t need to do all those at first. Um, you know, the first thing you need to do is to set up your business properly.
So what, um, you know, why should you form a business? Uh, so you know, there’s different types of entities that can give you liability protection. There’s tax advantages to different businesses. Uh, it helps with the salability of your business Trust Attorney Las Vegas. Uh, it definitely looks more professional, helps you keep clients, uh, and then it can also provide you with some freedom. So there’s four main types of business entities, uh, and um, we’re going to go through those. So there’s sole proprietorship, partnerships, corporations and LLCs. So sole proprietorship is the default. That’s where you just go out and you start making side hustle money. Um, you know, selling stuff out of your garage or on Amazon, but you don’t have an entity set up or you know, you do side work, like a handyman, something like that. Um, anybody can do it. There’s no documents required. Now technically you probably should get a state business license to say you’re operating in the state.
Um, and you may also need a city and or County license. Uh, but this is the default. You don’t have to actually have a formal entity setup with an operating agreement and pay the state fees to have it, an entity registered. Um, so that’s, that’s the default. Now, what’s the risks of that? The sole proprietorship, there’s no differentiation between your personal assets and the business assets. So if someone sues the business this or they’re suing you so they can come after your personal house, your personal bank account, you know, anything that you own in your name, it would be subject to that lawsuit. So it’s the most risk from a, from a liability standpoint. Um, just because you’re sole proprietorship doesn’t mean you can’t hire employees. You can still do all that. It’s just the most risky way to do things. So we don’t recommend that if at all possible.
Now there’s some industries like you know, financial advisors where they require their money to be paid into a personal account and there’s no real way around that. So that’s what we have to do. Um, but you know, as much as possible, we want to avoid the sole proprietorship Trust Attorney Las Vegas. So the next type of a business entity is a partnership. And that was, um, the most typical way you would see, um, you know, business operations for the long time because that was the only thing. It’s either you are by yourself where you had a partner and a general partnership that can be formed without any formal written agreement. It’s just two, two or more people doing stuff together. That’s a partnership. Uh, we would obviously recommend that you do have a formal written agreement. Um, but the partnership doesn’t really give you any more liability protection than being by yourself.
In fact, it can be a greater liability because if your partner goes and, um, gets the partnership in debt, then you would be personally liable for that debt even though you weren’t the one who signed for it. So there’s still a lot of risk there to have a partnership. As things evolved, they, there was the limited liability partnership came up and what this was, is basically, um, you know, you want to raise capital and get other investors, but they didn’t want the risk of being a general partner. So one general partner who handles the day to day operations Trust Attorney Las Vegas, uh, at least one is out there and they go and raise money from limited partners. So the limited partners contributed money. They could not be involved in any of the day to day operations. Um, and then they would have limited liability. The only thing that they would lose was their initial investment.
They couldn’t be personally liable for things that the general partner would. Now, the general partner would be completely liable for everything, but that was the next step. The evolution. And it’s still around today. You can still have, um, you know, uh, we call them an LP or LLP, limited liability partnership. Um, and this one does require you to have a written formal written agreement for it to work. Uh, next we have the corporation. This was the next step in this was to provide liability protection to people. Uh, investing in ventures. This was all the way back in, um, you know, uh, I’d say probably 15 hundreds with the East Indian trading company was the first corporation formed. Um, basically the, you know, as these sailors would go off on these acquisitions to get spices and explore the world, um, people who contributed money didn’t want to be liable to the families of those sailors who, if they died or anything like that.
So the corporation provided the shield. So where those, those individuals who invested would only lose the money that they had invested. They wouldn’t be liable for anything else. Now this is, um, you know, everybody who contributes to that, they, the only thing that they would lose is what they invested. There’s no personal liability to any member of the company. The corporation. Now the corporation, there’s two main types. There’s a C Corp, which is your traditional corporation. You think of privately held or publicly held companies, traded on the stock exchanges, those kinds of things. They can also be privately held. Um, it’s typically better for big companies because there’s double taxation, meaning that the company is taxed for the income as well as when they distribute income out to the individuals. They’re taxed as well. The other side is an S Corp. um, and it’s basically for smaller corporations it has to be less than 100 members, uh, or uh, owners of the corporation.
And the ownership must be held by an individual and there is no double taxation. Um, so it does help reduce that and also helps reduce the self employment tax. Now there has to be employees, paid income and um, you know, uh, quarterly tax filings and those kinds of things. There are certain requirements you have to make, but that’s an option so that you can have a corporation but not have that double taxation. And then the latest and greatest in a business setup is the LLC limited liability company. And, um, Delaware was the first one to put this out, early nineties, I believe. Um, Nevada was soon to follow as far as setting those up. And it’s kind of a hybrid between a partnership and a corporation. So you have the liability protection of a corporation with the flexibility of the partnership. So flow through to the, to the members from income standpoint.
So, you know, I’m double taxation. Uh, you could also elect to be taxed as an S Corp, uh, with the LLC. So you know, if you want to do that, talk to your CPA that’s, you know, could help save you some money from the tax side. Uh, but it’s, it’s really, um, you know, the most flexible way of doing things. So you have, uh, like I said, flow through, I don’t, um, or you can file a separate taxes if you want. It does have the liability protection and um, the, in Nevada and Delaware and about 12 other States, there is what’s called a series LLC. And this is really the newest thing in 2005, is when Nevada adopted this. And what the series LLC does is it used to be to protect, let’s say you had multiple rental properties and if you wanted to protect each property from the other, so if someone sued you and got that house, they wouldn’t be able to get all of your rental properties.
You’d have to do a separate LLC for each property. And that can get expensive because you have that many tax returns to do that many filings with the state. Um, you know, especially here in Nevada, our filing fee is $350 a year for an LLC that starts to add up. Well, a series LLC says we can put house one, series one house two in series two. It’s still under the same LLC, but from a liability standpoint, each series is separate from each other. So it’s as if they’re separate LLCs from a liability standpoint. And then when, um, you know, for the annual renewals, you only have the one filing fee, you only have the one tax return to file. So it can kind of be that really, ideally best of both worlds Trust Attorney Las Vegas. Um, and same thing, you can still have it be taxed as an S Corp if that’s what you elect to do.
So, uh, those are the four main entities and how they work. Now within the LLC or corporation, there’s professional corporations or professional limited liability companies. Those are just basically if you have, um, you know, a specialty, you know, so doctors, dentists, attorneys, CPAs, you know, something where there’s high, um, personal malpractice, those ones we put in professional season, what that does is it limits the other members of the LLC or the corporation from the personal liability, um, of the, the person who performed the work and is getting sued. So it helps give a little bit more protection that way. And it also just helps designate that they are, I’m a professional in the sense that they have that specific licensing. So that’s all that that means. So you might see PLLC or PC just means it’s a professional corporation or professional LLC.
Um, so those are some things to consider when you know what entity type you’re doing. Um, I highly recommend you’ve talked to an attorney and a CPA because there’s going to be different approaches from a liability standpoint and from a tax standpoint, we want to make sure that you’re on the same page. Other things that you would want to look at is, um, you know, what kind of contracts you’re going to have. Um, are you having employees or are you doing independent contractors? You know, there’s a lot of things to look at. So if you’re starting a business, it wouldn’t hurt to sit down with the attorney just to look at options, see what, what your risk is and what type of things you may need to get set up and what stuff you can do now versus what you can do later. And that is all we have for today for setting up a business. So hopefully you enjoyed that. Four different types of entities you can choose from, you know, make the choice that you want. Don’t leave it up to be the default. Thanks for listening. Bye.