A limited liability company (LLC) is a specific type of business that is popular with business owners because it can protect them from certain types of business liability. It helps owners, known as members, keep their personal assets from having to satisfy the debts or other legal obligations of the company, because the LLC form limits their liability.
LLCs are favored for startups and small- to medium-sized businesses, because they allow for flexibility. This derives from the fact that they pair the characteristics of a corporation with those of a partnership or sole proprietorship.
There are 3 types of LLCs in Nevada as follows:
- The Standard LLC: This is simply a standard LLC,
- The Professional LLC: This LLC is for companies run by and for licensed professionals such as accountants or engineers;
- The Foreign LLC: A foreign LLC is an LLC that is first created in another state or country and subsequently the owners decide that they want to form an LLC in Nevada also.
What Are the Requirements for an LLC?
For all three types of LLCs in Nevada, the requirements are essentially the same. First, a person needs to select a name that is not currently being used by any other company. The company’s name must end with the phrase “limited liability company” or an appropriate abbreviation. The name should not include any designation that would cause it to be confused with another form of business. The desired name should not be similar to any other reserved business name.
There are also some words that are forbidden for use by certain LLCs. There are Nevada statutes and regulations governing the Nevada LLC naming process and it includes restricted words, so a person would want to consult the Nevada Secretary of State’s Restricted Word List page.
A person also needs a registered agent who can receive service. Or, alternatively, an officer or employee within the company can serve as the registered agent.
An operating agreement is not required by Nevada state law but is recommended. It is much like a partnership agreement and contains provisions which detail how the company is going to be managed and what the organizational preferences of the members are.
What Paperwork Do I Need to Form an LLC?
To form an LLC in Nevada, a person must complete an Articles of Organization form. The form asks for the name of the company, the name and address of its registered agent, and optionally if the owners have established a date of dissolution.
The members must also decide if the company is going to be run by professional managers or members. It is necessary to obtain a state business license.
A Nevada LLC needs a minimum of one member or manager, although it can have as many members or managers as the members wish to have. Some states require an LLC”s members and managers to live in the state, but Nevada does not. Members and managers do not even have to live in the state. In order to successfully form an LLC, a person must be 18 or older.
The articles of organization are filed with the secretary of state for the state of Nevada. Once that is done, the LLC becomes a separate legal entity. All of the required forms can be found online at the state’s website.
For professional LLCs, a different Articles of Organization form is completed and submitted. The form is similar to the other LLC form, but also includes the names and addresses of the original members and the profession that they practice.
If a person registers a foreign LLC, they need to file an Application for Registration. This form asks for the name of the company, the name that is going to be registered in Nevada if it is different, and when and where the company was formed initially. The form also asks for the name and address of the company’s registered agent, the address where records will be kept, the address of the office, and the names and address of each manager and member.
What Benefits Does Nevada Give to a LLC?
LLCs in Nevada are not required to pay a franchise tax. A Nevada LLC does not have to pay tax on its profits and the profits are not passed through to the members. So they do not pay Nevada income taxes on the LLC’s profits either. There are also limited reporting requirements. Nevada law does not require LLCs to have meetings or keep records, although an LLC’s members might want to do these things for practical purposes.
The Internal Revenue Service (IRS) allows the members of an LLC to choose how the IRS taxes their company. For example, if there is only one member, the IRS treats it as a sole proprietorship for tax purposes. If there are two or more members, the IRS taxes the LLC as a partnership. If additional necessary filings are made, the IRS treats the LLC as a C corporation or an S corporation for tax purposes. This is true in every state, including Nevada.
When deciding where to register your LLC, Nevada offers a range of state benefits. In fact, over the past few years, Nevada LLCs have become as well regarded in some ways as Delaware LLCs. Some of the main benefits include:
- No state corporate or personal income tax;
- No state franchise or admissions tax;
- No state estate tax or gift tax;
- High levels of privacy;
- None of the members need to even live in the state of Nevada.
A member or manager of a Nevada LLC can literally and legally phone it in.
One major advantage of a Nevada LLC is the fact that a member is not required to file a list of company assets with the Secretary of State. In addition, the names of members do not need to be listed with the state of Nevada. Of course neither a member nor manager is held liable for the company’s liabilities, as noted above. There are some exceptions, however.
This degree of privacy allows a Nevada LLC to issue membership in the LLC in exchange for capital, real estate, services, or personal property. The value of this kind of transaction is determined by the LLC directors and specified in the articles of organization. Nevada considers these decisions final. It is recommended that if membership is exchanged for an item or service of value, the members should consult a securities lawyer for advice.
Because there would not be any official record of the assets of a member or the LLC, except for filings made with the IRS, there would be no official record of a member’s assets. Of course, fillings with the IRS are confidential. So a member’s assets would not be linked to the member in any official record that is accessible to the public.
Technically, a person could be a professional in another state and have assets of unlimited value invested in private businesses, mutual funds, or other assets in an LLC in Nevada. But a person would want to consult a Nevada tax lawyer before attempting to arrange this
Creditors who are seeking an LLC member’s ownership interest have one legal procedure to use and that is a charging order. A charging order tells the LLC to pay the creditor any distributions or profits that are owned to a named member. This does not affect the LLC’s management, only the financial interests of the member debtors.
The creditor who has a charging order cannot force an LLC to make a distribution and it cannot make a court sell, dissolve or foreclose on the LLC to pay off the member’s debt. The member debtor, however, is unable to take distributions from the LLC until the debt is paid. There may, however, even be strategies to avoid this limitation.
What Disadvantages Does Nevada Give to a LLC?
Nevada has some of the highest LLC filing fees in the country. Also, if the LLC does business outside of Nevada, such as having a brick-and-mortar store in other states, then the LLC is going to be subject to income tax on all income earned in other states in which the LLC does business by the states in which the income is earned. However, the income would not be taxed in Nevada, and any income earned in Nevada would not be subject to Nevada state income tax.
There is, however, a commerce tax on businesses with more than $4 million of Nevada gross revenue.
Where Can I Find the Right Lawyer?
A Nevada corporate lawyer can help ensure that the LLC is the right form of business for your purposes and then guide you through the process of setting up an LLC.
They can also advise you fully about Nevada tax law, where your LLC’s income can be taxed and how the privacy of assets can be protected under Nevada state law. In addition, your lawyer would be able to draft an operating agreement that would serve the specific purposes of your business and how its members wish to manage the company..
