A Nevada series LLC is a type of Nevada Limited Liability Company (LLC) that can be formed with one or more members.
Nevada law provides for the use of Nevada series LLCs to protect the assets and liabilities of its individual members, even if these members are not actively working in the company.
Nevada series LLCs are an excellent choice for Nevada entrepreneurs who want the best of both worlds: protection of personal assets and low taxes on income generated by the business itself.
Nevada is one of the few states that allow for the formation of a series LLC. There are still a lot of legal matters to be ironed out as this type of business entity grows in popularity.
Here's what you can expect from this business entity and needs to be done before you can legally form a Nevada series limited liability company.
What is Nevada Series LLC?
Nevada series LLCs are often called "checkbook" or "hybrid" limited liability companies because they combine some of the best features of traditional corporations and partnerships into an entity that can be easily formed in Nevada, without all the paperwork required by a corporation.
Multiple LLCs are combined to form a series of business entities, each with its own separate assets, liabilities, and owners.
The series LLC is a master LLC (parent LLC) that oversees the different entities it creates. This type of LLC can be very advantageous for businesses with multiple locations or divisions because it allows them to keep their finances separate without having to create multiple entities.
Each subsidiary LLC in the series is considered a separate entity, but the master LLC itself is not considered a separate entity.
Because each subsidiary LLC exists independently of its master or any other series in the master's family tree (or basket), creditors cannot pursue assets held by one subsidiary to satisfy debts owed by another—which makes Nevada Series both flexible and convenient for business owners with multiple operating units under common ownership structures.
The Advantages of Series LLC in Nevada
Series LLC consists of a series of liability cells that are segregated from each other.
Only the assets in an individual cell will be used to pay for claims or debts related to liability incurred by this specific cell.
The rest of the assets and tax liabilities remain protected when any claim is made against one particular liability cell within a series limited liability company. This means you won't lose your home, car, or other valuable assets in case of a liability lawsuit.
Apart from asset protection, another great feature of Series LLC is that it can provide liability protection. For example, if you are operating a restaurant and someone gets sick from eating at your establishment, their illness could potentially lead to a liability lawsuit against your company.
By forming a Nevada series LLC, liability can be broken up into several cells, which are segregated from the other liability cells of your LLC.
Forming a series LLC is more hassle-free than other business structures because you don't have to register every single entity separately. Once your master LLC is registered with the Secretary of State, you don't have to repeat the process for each new cell you form.
Tax benefits are another plus of series LLC. The income and losses from each cell are treated as separate entities for tax purposes, which can provide some considerable savings on your annual tax bill.
The parent LLC files one tax return, and the profits and losses from each cell follow up on their separate tax returns.
Finally, a series LLC offers tremendous flexibility in structuring your business structure. This is because you can choose whether to have one manager or multiple managers for all of the cells within a parent LLC. Managers may even be given different roles depending on which liability cell they manage.
The Disadvantages of Series LLC in Nevada
A series limited liability company in Nevada is a lot like an affiliate company. The main problem with the series LLC is that it can make things more complicated for you as a business owner, especially if your company enters bankruptcy proceedings or has to deal with creditor claims.
The first disadvantage of a Series LLC in Nevada comes from the fact that the laws that govern these entities are still largely underdeveloped, which leaves a lot of room for confusion.
And lastly, the maintenance of these complex business structures usually requires help from a professional, which will cost additional money.
Nevada Series LLC Taxes
The tax treatment of series LLC in Nevada depends on the business activity of each series. Generally, series LLC in Nevada pays Modified Business Tax based on its total income.
Additionally, series LLC in Nevada is not subject to any Nevada franchise tax or Nevada corporate income tax.
As a whole, a series limited liability company in Nevada is not subject to Commerce tax. However, if one or more of the series derived its income from sales and uses property taxes on real and personal property that the company will distribute as part of any dividend distributions made under this chapter or from licensing fees for intrastate or interstate telecommunications.
Because income and expenses from the child series flow through to the parent LLC, the main LLC typically only needs to submit one tax return.
The Formation of Series LLC in Nevada
To form a Nevada LLC series, business owners need to take several necessary steps and pay filing fees before their company can legally conduct business in the state.
Choose a Business Name
Nevada's series limited liability company has to follow the naming requirements specified for such business entities. The name of the LLC has to contain the words "series LLC" or "limited liability company series" as a suffix.
The name has to be followed by the specific type of business entity, e.g., "protected series." The business name has to be different from any other entity registered in the state.
Appoint a Registered Agent
A registered agent is a person with whom the Nevada Secretary of State has to maintain contact regarding business entities. The registered agent is in charge of receiving essential legal and tax documents on behalf of a series LLC in the state.
All companies that register as series LLC must appoint an authorized agent who will have all the required authority to serve this purpose.
File Articles of Organization
Articles of Organization are the official document of the company that sets forth the basic information about a business entity. To form a series LLC in Nevada, Articles of Organization have to be filed with the Nevada Secretary of State's office.
The document must include the name and address of the company and the name and address of its registered agent. You only file Articles of Organization for the master LLC. The filing fee is $75.
Create Operating Agreements
An operating agreement is an internal contract that establishes the internal rules for how a series limited liability company in Nevada will conduct business. It also sets out guidelines to manage all protected assets and multiple properties and specifies each member's capital contributions and pro-rata share of profits or losses.
Without an operating agreement, there might be a lot of confusion and potential disputes between the members of a series of limited liability companies. A carefully drafted operating agreement can save a lot of money and time, so it pays off to hire a professional to prepare one for you.
Get an EIN
The EIN is a tax identification number that is assigned to all companies in the U.S. by the Internal Revenue Service (IRS). When forming a series LLC, you have to get an EIN for each protected series within your company.
Open Bank Accounts
Each individual series should have its own bank account. This will help to keep track of the finances and assets associated with that particular series. It will also maintain a more simple record keeping and accounting system.
You should never use the bank account of one LLC to cover the expenses of other divisions because you will no longer be able to protect assets and liabilities associated with those other series.
How Long Does It Take To Form a Series LLC in Nevada?
The processing time is not that different than a regular LLC, which means online filings can be processed within one business day.
On the other hand, paper filings take significantly longer to process, sometimes around three to four weeks.
How Do I File an Annual List in Nevada?
A Nevada annual list is the equivalent to the annual report LLCs file in other states. To file this document, you need to download the form from the Nevada Secretary of State website, fill it out and mail a hard copy of it.
If you want your annual list to be filed online, an extra charge will be added on top of what you pay for filing fees. You only need to file one annual list instead of one for each separate business entity within the series.
What Is the Difference Between a Series LLC and Restricted LLC in Nevada?
A series limited liability company is allowed to have one or more "series." Each series is a separate entity, with its own assets, liabilities, members, and managers. A restricted LLC is a limited liability company that has been formed for a specific purpose and cannot engage in any other business activity.
This type of LLC is only available in Nevada and was due to different investment objectives of investors. Distributions of restricted LLCs are extremely limited and are generally made for the return of capital only.
How Much Is a Series LLC in Nevada?
The cost of the governing documents (the Articles of Organization) is $75. However, the entire company also has to pay the legal fees for the Initial List of Managers or Members ($150) and the State Business License Application ($200).
In case you need additional business licenses, there is an additional fee of $100. Assuming you don't need any other licenses, the entire process might cost even more.
Starting a series limited liability company is an important step, but it can be difficult to know what you are doing if you've never done it before. The proposed regulations governing this type of entity are still being debated, and there is a lot of a grey area when it comes to the process.
Although you have all the tools and information available for success, it may seem overwhelming at first. With careful planning and professional legal advice from someone who knows LLC law inside out, starting your own business should not feel like too much work.