What to know about creating an LLC

| Mar 20, 2021 | BLOG

A limited liability company (LLC) is similar to a corporation in many different ways. For example, like a corporation, an LLC is separate from its owners. Therefore, anyone who tries to file a claim against the company can only recover assets owned by that entity. In some cases, a Nevada LLC can choose to be taxed like a corporation. Let’s take a closer look at some of the rules governing this type of business structure.

Who can form an LLC?

Generally speaking, individuals are allowed to be the sole owners of an LLC, but there is no limit to the number of people who can have an ownership stake in such a business. Furthermore, domestic corporations, other LLCs and entities based outside the United States can also be members of an LLC.

How does an LLC change its tax status?

By default, a LLC is taxed as a sole proprietor or a partnership. However, by filing Form 8832, you can request to be taxed like a corporation. A business law attorney may be able to help you determine which type of tax treatment is best for your organization.

What to know about piercing the corporate veil

If you don’t keep adequate corporate records, the IRS could move to “pierce your corporate veil”. This means that you might be liable for debts that your company incurs, and it may also mean that the government might be able to seize assets owned by the LLC. Creditors may also seek to pierce your corporate veil if there is reason to believe that you acted in bad faith. Finally, you might be held liable for certain corporate debts if the business goes bankrupt.