Choice of Business Entity
It is prudent for you to examine the manner in which your business is structured. Sole proprietorships and partnerships can be more risky for the participants in that the personal assets of the participants are at greater risk. It is best for each money services business to be set up as a separate legal entity, such as a corporation or limited liability company (LLC), in order to protect owners from personal liability and to protect personal assets to the extent possible.
One of the immediate risks to an MSB operating as a sole proprietorship or as a partnership involves licensing. Changes of ownership would typically require re-registration and new licensing at the federal and state levels in the event of:
- Sole proprietorship being sold to a new entity
- Sole proprietor dying
- Partnership acquiring a new partner or the partnership ownership interest changing
- A partner in a partnership dying
New licensing and registration would typically be required for corporations and LLCs due to:
- The LLC or Corporation being purchased by another company or entity and the LLC or corporation being absorbed by the company or entity
- Administrative dissolution and/or lapsed registration of the corporation; i.e. failure to maintain registration with the state, corporate formalities, payment of fees.
In some situations it may be appropriate to form multiple business entities as the best asset protection strategy. For example, if you own real estate and property used by your business, consider a two entity strategy where one entity leases or rents assets to the entity providing financial services.
While corporate entities can be established in each of the states, tens of thousands of entrepreneurs are flocking to Nevada each year to incorporate. The State of Nevada is very pro-business and offers very favorable incorporating conditions.
The process of incorporating in Nevada is simple, inexpensive and painless. And, unlike other states, personal liability is determined by statute and not by the court system on a case-by-case basis. Individuals are subject to the standards set by statute and not by varying standards applied by individual judges. By statute, personal liability for corporate actions is only considered in cases of fraud, making Nevada the best state for incorporating for corporation owners and operators who want to protect their personal assets. Unlike many other states, Nevada law makes the actions of a corporation’s representatives exempt from personal responsibility, except in cases of outright fraud.
As with all such matters, you should seek competent legal and accounting advice. If, upon the advice of your chosen legal and/or accounting professional, you choose to change the legal structure of your business to better manage risk, you may consider using the services of Nevada Corporate Headquarters Inc. While you could register another corporation in your home state, there are specific benefits to Nevada incorporation that should be considered. Please access http://www.nchaffiliates.com/msbcompliance/ to learn more and order a free book explaining business structures and the benefits of incorporating in Nevada.
Nevada Corporate Headquarters Incorporated (NCH) has been the business start up specialist in Nevada for over fifteen years. NCH has formed over 30,000 business entities worldwide and has a nationwide reputation for assisting entrepreneurs, corporations and licensed professionals. You can live anywhere in the world and still own and operate a Nevada based entity. NCH is the leading provider for the formation of Nevada corporations, Nevada LLC creation, asset protection strategies, and many other business and financial services.