Choice of entity refers to choosing the legal form for operating your business. A business may be operated as (1) a corporation; (2) a general partnership or limited partnership; (3) a limited liability company (LLC); or (4) a sole proprietorship. Each state has its own laws for the formation, operation, and maintenance of these business entities.

The primary considerations in choosing the best form for operating your business are (1) protecting your personal assets from the liabilities of the company; (2) tax strategies designed to deduct early losses, avoid double taxation, and convert ordinary income into long term capital gain at a lower tax rate; (3) an entity that will be attractive to potential investors and lenders; (4) an entity that allows you to offer equity incentives to employees (stock options); and (5) the cost of forming the entity and properly maintaining it—including filing the required documents with state agencies.

In Nevada, the choice of entity for operating a business is an important decision that affects legal liability, taxation, investment attractiveness, employee incentives, and administrative requirements. The options include corporations, general partnerships or limited partnerships, limited liability companies (LLCs), and sole proprietorships. Nevada law provides for the formation and operation of these entities, each with distinct implications for personal asset protection. For instance, corporations and LLCs offer limited liability to their owners, shielding personal assets from business debts. Tax considerations are also crucial, as different entities have varying tax treatments; for example, corporations may face double taxation on profits, while LLCs can offer pass-through taxation, avoiding this issue. Attractiveness to investors and lenders often favors corporations and LLCs due to their structured governance and potential for equity offerings. Entities like corporations and LLCs can offer stock options to employees, which can be a valuable incentive. Lastly, the cost of forming and maintaining an entity in Nevada varies, with corporations and LLCs typically requiring more formalities, such as annual filings and fees, compared to simpler structures like sole proprietorships.