Is it better to incorporate my nonprofit or not?

How to incorporate Real Estate biz in AZ???

• You want to incorporate a home-based business in AZ. You will not have an Internet presence for your business. The business will involve the purchase of Tax Lien Certificates and purchase, rental and resale of improved real estate as an investment. You would like to be able to pay expenses with pre-tax profits from these investments and then be taxed only on net profit. You are concerned about protection from lawsuits and liability, tax reduction strategies and ease of administration. You will be the only “owner”. Question: 1. Under what form would you incorporate and why? (LLC, C, S, LP, GP)? 2. Would you incorporate in Nevada and why/why not? (All business will take place in Arizona). 3. You want to run the business under a couple of different DBA’s. How easy is this to do and how do you do it?

• Answer:

  Hello Raptor ~ I am not an attorney licensed to practice law in the State of Arizona and I don't play one on TV. The information below is readily available, including explanatons of provisions in the Arizona Revised Statutes and Nevada Revised Statutes, for informational purposes only. Google Answers Researchers do not give legal advice. The information is not intended to be legal advice and should not be substituted for consulting with a competent attorney with your questions and concerns. ** 1. To answer your first question: "1. Under what form would you incorporate and why? (LLC, C, S, LP, GP)? I would incorporate as a corporation and make an S Corporation election after the corporation is legally formed. A "C" Corporation designation merely refers to a standard, general-for-profit, state-formed corporation. An S Corporation starts as a general for profit corporation upon filing the Articles of Incorporation at the state level. The S Corporation election is usually made for tax reasons. A "C" corporation is required to pay income tax on taxable income generated by the corporation. On the other hand, an "S" Corporation (formed by submitting Form 2553 to the Internal Revenue Service) is taxed like a partnership or sole proprietorship rather than as a separate entity. The income is "passed-through" to the shareholders for purposes of computing tax liability and a shareholder's individual tax returns will report the income or loss generated by an S corporation. An LLC is a hybrid between a partnership and a Corporation that combines the "pass-through" treatment of a partnership with the limited liability accorded to corporate shareholders. Unlike a corporation which can have as few as one shareholder, most states require that an LLC consist of two or more members (owners), and Arizona requires a limitation on the scope and duration of LLCs (see: A.R.S. §29-632 - http://www.azleg.state.az.us/ars/29/00632.htm ). Given that you are the sole owner/incorporator, etc., an LLC (Limited Liability Liability Company) or a partnership arrangement is not practical. =================== ** In answer to your question no. 2: "Would you incorporate in Nevada and why/why not? (All business will take place in Arizona)." It is usually less complicated and more cost effective to incorporate in the state where you are planning to operate your business. If you incorporate outside Arizona, you are still may be required to qualify to do business in your home state. (See Arizona Corporation Commission information - http://www.cc.state.az.us/corp/faqmanual.htm#cf The cost of incorporating in Arizona will usually be less than incorporating in another state and then qualifying to do business there "foreign" corporation. The advantage to incorporating in Nevada is its privacy and liability protection status and certain tax advantages. Nevada has no state tax on corporate profits, no state annual franchise tax, or no state personal income tax. Stockholders of a Nevada corporation are not public record, allowing complete anonymity. However, if you incorporate in Nevada while your business is located in Arizona, you will need to qualify to do business in Arizona. (See Nevada Revised Statutes - Section 78, "Private Corporations" - http://www.lectlaw.com/files/sts04.htm ) In either case, tax-wise, if you make the S Corporation election, you will still bear the responsibility as a shareholder for the federal taxes. Unless there was a compelling reason to form a Nevada corporation, I'd form a corporation in Arizona. ** In answer to your question number 3: "You want to run the business under a couple of different DBA’s. How easy is this to do and how do you do it?" Arizona allows you to do business under different names if you wish, however, according to information provided by the Arizona Corporation Commission, "If a corporation uses a DBA, however, the DBA cannot include the word incorporated or an abbreviation thereof." http://www.cc.state.az.us/corp/faqmanual.htm#cf Search terms used: Arizona Revised Statutes Corporations Arizona Corporation Commission Arizona corporations incorporating in Arizona Nevada Revised Statutes Private Corporations Nevada corporations incorporating in Nevada Definition: S Corporation I trust this answers your question, and good luck with your endeavors! Yours ever so, Serenata