Fast, Professional Nevada LLC
Why Form an LLC in Nevada
Nevada has long been one of the forerunners in formation of limited liability companies. The state legislature has passed laws specifically designed to attract business formation, and the government of Nevada is likely to continue catering to the needs of entrepreneurs starting businesses. Other than the favorable laws, forming an LLC in Nevada has a variety of benefits.
- Low Taxes and Annual Fees
The LLC structure operates as a “pass through” entity for income tax, meaning that profits are only taxed once they “pass through” the LLC to the individual members. Nevada LLCs also do not face annual taxes that other states impose on LLCs, such as admissions taxes and franchise taxes. The only annual fees that Nevada LLCs are subject to are a filing fee for an annual list of members ($150.00) and an annual business license fee ($200.00)
- Asset Protection for Members
Many people forming an LLC do so to shield their individual assets from any liabilities that are incurred by their business. Legally, an LLC is a separate entity from the members. If an LLC incurs debts and liabilities, those obligations cannot be enforced on the members of the LLC themselves.
- Reduced Liability
Most of the recent changes that the Nevada legislature has made have been to reduce the liability faced by members and managers of LLCs. Most jurisdictions will hold members and managers liable for a variety of duties. However, Nevada only requires that managers and members be held to good faith and fair dealing. Nevada allows for an operating agreement to indemnify managers and members of Nevada LLCs from liability from actions that are in good faith and generally not opposed to the LLC’s best interests, so long as the actions are not believed to be illegal. Additional duties can be imposed on members and managers by the LLC operating agreement; however, Nevada has the lowest fiduciary requirements if so provided in the operating agreement of any state in the United States.
- Protection of Managerial Interest
Recently, the Nevada Supreme Court has clarified that a charging order is the sole remedy available to creditors of LLC members. The Court said that if a creditor of an LLC member wins a judgment to attach the member’s interest in the LLC, the only interest that can be charged is the economic interest, rather than the managerial or voting interest. This means that the creditor would earn the profits and losses associated with that interest, but not the associated managerial control of the LLC.
How to Form an LLC in Nevada
- Choose an LLC name
Before drafting any organizational documents, you must choose a name for the LLC. Nevada law requires that LLC names be distinguishable from the name of any other entity on official state documents. No marks, symbols, or other stylistic differences can be used to differentiate LLCs from similarly-named entities. Instead, the words of the LLC name must clearly distinguish it from every other company by adding or changing letters or words that distinguish the name. All LLCs formed in Nevada must include some indication that they are an LLC in their name by including words such as “Limited”, “Ltd.”, “LC”, “LLC”, “L.L.C.”, or “Limited Liability Company.” If a potential name does not satisfy these requirements, then the Nevada Secretary of State will reject the name, requiring an alternate name to be submitted prior to formation. It is unusual that Nevada allows for the ending “Limited” for an LLC because other states only allow that for a corporate ending, Nevada allows either an LLC or corporation to use the corporate ending “Limited”.
- Finding a Registered Agent
Under Nevada law, all LLCs formed in the state must have a registered agent with an address in Nevada. The registered agent must have a mailing address in Nevada that is not a PO Box. Many LLCs choose to hire commercial registered agents, such as Agents and Corporations, Inc., which can also be hired to help with the formation process.
- Drafting and Filing Articles of Organization
After a name has been chosen, you must draft and file articles of organization, which will bring the LLC into official existence. There are certain pieces of information that must be included in the articles of organization:
- The name of the LLC;
- Designation if the LLC is a restricted LLC or a series LLC;
- The name and address of the registered agent;
- A registered agent acceptance with the name and signature of the agent and whether it is a commercial registered agent listed with the Nevada Secretary of State such as Agents and Corporations, Inc.;
- A list of the managers of the LLC, as well as indication of whether the LLC will be managed by members of the LLC or third-party managers appointed by the members; and
- If any additional provisions of internal organization are included with the articles of organization, they must be attached on a separate exhibit attached to the articles of organization.
When the articles of organization are completed, they are submitted to the Secretary of State, along with a filing fee. Processing the articles of organization could take the Secretary of State several weeks, although there is a 24-hour expedited option available for an additional fee. After processing, the Secretary of State will return a file-stamped copy of the articles of organization to the mailing address given. If filed by Agents and Corporations, Inc. this would be returned to our office. We then send this to you with a cover letter and any other documents you may order.
Nevada requires that LLCs submit a list of members before the final day of the month following the month of initial formation, although this does not need to be sent with the articles of organization. This initial listing of members is accompanied by a $150.00 filing fee. Following formation, this list must be submitted annually. Additionally, an LLC must file to obtain an annual business license from Nevada at the same time as the list of members is submitted, which costs $200.00 per year. Failure to obtain the Nevada business license and file the initial list will result in a loss of good standing status and penalties.
- Drafting an Operating Agreement
Nevada law does not mandate an operating agreement for an LLC. However, there are a few reasons that a Nevada LLC should have an operating agreement:
- Nevada law provides very few provisions that specify how LLCs are to be governed. In multi-member LLCs, an operating agreement will help resolve any problems that arise between members;
- Many banks will require an operating agreement before lending to or opening an account for an LLC; and
- The Nevada LLC operating agreement may remove duties owed to other members provided the actions of the manager or controlling member are in good faith, not opposed to the benefit of the company, and not intentional fraud, misconduct, or breaking the law.
A typical operating agreement will set forth a variety of provisions, such as termination of membership, dissolution of the LLC, distribution of profits and losses, transference of interest, and liability. However, there are many other possible provisions, some of which are vital to a successful organization. While LLCs can draft their own operating agreements, many LLCs choose to use an incorporation firm because their standard agreements contain provisions gathered from years of professional experience.
- Can I Form a Nevada LLC without an Incorporation Service?
It is possible to form an LLC in Nevada without an incorporation service. However, an incorporation service will make the process much more streamlined and efficient. More importantly, an incorporation service would be better able to provide an operating agreement that could clearly set forth the governing provisions of the LLC. If you have special provisions you want, they may be added after you receive the draft agreement from the incorporation service. This may eliminate costly disputes and lawsuits that could arise down the road. Additionally, the incorporation service usually charges only nominal fees to assist with this process because they want to assist the company in the future as its commercial resident agent.
When deciding where to form your company, consider that Delaware has advantages over your home state that may benefit you. Go