Starting from scratch:
Starting a small business under the limited liability concept
Cut and dry like an aged porterhouse, business in Las Vegas (Nevada) is on a decline. However, all hope is not lost. As they say everything tastes better if you start from scratch. All Las Vegas (Nevada) needs is a new and improved business (recipe) plan.
For starters let’s propose we start our recipe with the basic ingredients and add in just a hint of a new taste. In business terms what does this all mean? It’s relatively simple and it starts with forming a small business.
Now that we have a small business form as our starter ingredient, we add in a hint of that new taste Las Vegas needs. This new taste is called the limited liability concept.
Hang on! Before I dwell on the intricacies of this simple recipe, one must have specific background information available to them before planning a small business around the limited liability concept.
So let’s travel back to a place in time and yes, I’m using the DeLorean. Now visualize yourself during the pre-recession era of Las Vegas. During this time construction was booming which exponentially provided Las Vegas with a staggering job growth.
Multitudes of high value residential and business properties were constructed all around the Las Vegas valley. Essentially this created an upward trend in terms of promoting new businesses. More importantly national law firms were opening satellite offices. Commercial and residential Real Estate agents had virtually limitless opportunities. Of course casinos were racking in their usual amount revenue. So far so good right?
However, Las Vegas was and (still is) relying heavily on gambling revenues to bolster their economy. Soon enough the widespread of this recession hit Las Vegas the hardest. One of the reasons Las Vegas was led to a downtrodden economy, was the fact that too many private investors were relying on the glamour and luster of Las Vegas. The cities glamour and luster was and (still is) considered in economic terms, a Gross Domestic Product.
The city of lights was unprepared for what would happen next. Ultimately a domino effect occurred. The value of residential and commercial real estate properties declined rapidly. As an offset to this decline, mortgage rates climbed to an alarmingly high rate. Residents were forced to foreclose on residential properties. Large and small businesses alike were filing for bankruptcy. This rapid financial overturn effected the economy too fast for Las Vegas (and Nevada) to fully recover. Now let’s travel back to the present time.
Plain and simple statistics do not lie; Nevada was heavily regarded as one of the leading states in terms of business formations and incorporations. Now Las Vegas (Nevada) has a bad aftertaste in their mouth. Let’s bring Las Vegas (Nevada) back to good standing with this simple recipe.
As stated above the first ingredient calls for, restructuring small businesses around the limited liability concept.
A limited liability company hereinafter as “LLC” is defined as follows: An unincorporated business form which allows a business to be treated as a partnership for tax purposes. An LLC is a hybrid business concept with a cross between a partnership and a corporation. An LLC consists of members in contrast a corporation consists of shareholders, directors, and officers.
The member of an LLC is not liable for its debts as a business nor is liable in regards to additional members of the business. In order to treat your business as an LLC one must file the proper document titled: Articles of Organization. This document can be filed with the Secretary of the State of Nevada. It’s that simple. Let’s take a brief look at how the LLC rose to stardom.
An LLC was promulgated as a new de jure corporation. In 1987, the state of Montana was the first to adopt this new business form. Accordingly this new form was highly touted among the legal and business communities. Soon thereafter every state has adopted the LLC form. This form of course varies as states have adopted their own statutory laws which define their version of an LLC.
What makes this ingredient taste so good you ask? One of the advantages is flexibility for taxation purposes. Specifically you can treat your LLC as a partnership which allow the pass-through taxation to govern your business. Under this option the LLC is not subject to double taxation. The income flows through owners or investors. Additionally an LLC can also be taxed as an S Corporation, C Corporation, or a Sole Proprietorship. As if these options aren’t tempting enough.
Raising Capital is like using Yeast as your main component in baking goods. Capital in a business sense is simply the wealth generated from your business. This includes any money or assets that may add value to your business. This financial attribute allows your business to grow from that little lemonade stand into a fully fledged profitable business. Before you consider starting a business make sure you have enough mad money saved up in that piggy back in case of an emergency.
A little bit of this and add a dash of that. An LLC is quite flexible in terms of structuring, building, and organizing. As defined above a person simply may form an LLC by filing the Articles of Organization. The Articles of Organization is a document that contains certain requirements and provisions which allows a business to be recognized as an LLC within the state of Nevada. In contrast a corporation is recognized through the filing of the Articles of Incorporation. Additionally a corporation must file other documents to preserve its status quo. Corporations are high maintenance but they do have their advantages.
In terms of business structuring, an LLC is not as high maintenance as a corporation. Yet an LLC remains a strong business structure in its own right. An LLC may be organized two ways:
(1) Member-managed, the business owners make the decisions, such as issuing shares of stock or hiring employees.
(2) Manager-managed, members of the business may select a person(s) to make the business decisions. A LLC may vote on a person(s) to make these decisions. Much like a corporation whereas the shareholders have voting powers and may select an individual to run the company.
Noted: In business always have a formal written operating agreement which lays out specific terms, conditions, and provisions. This agreement is the bread and butter so to speak that will literally define your business as an LLC.
For example an operating agreement shall include: setting forth specific job duties for each member and the amount of votes needed to elect a manager. An operating agreement is somewhat similar to the bylaws of a corporation. In order to have a functional operating agreement, the agreement should describe the internal management structure of the LLC. Every member must mutually agree on the terms, conditions and provisions.
Now that have I provided you the basic ingredients for an LLC. Are you ready to start cooking?
Disclaimer:
This blog is not intended to be conveyed or construed as legal advice or a legal consultation. The facts aforementioned above are dictated solely as to provide information. Please do not contact the author if you seeking legal advice or a legal consultation. Please contact a business law firm or a licensed business attorney in good standing with the Nevada State Bar and the American Bar Association.
