A Nevada series LLC is a specialized type of LLC, allowing single or multiple members. Nevada law safeguards members' assets and liabilities, even if inactive. This is something that we learned when we first started working on Series LLCs in Nevada.
It took us a while to grasp these concepts. Together with my team of legal experts, I have been through all phases of running a Series LLC in Nevada.
From our experience, having a guide like this one would have made our business procedures faster.
Quick Summary
- Series LLC in Nevada is a new and unique business structure that allows multiple series under one main LLC.
- The idea behind series LLCs is that each provides liability protection and cost savings.
- This business structure is recommended for business owners who want to manage various businesses or business activities under one entity.
What is Nevada Series LLC?
A Nevada Series LLC is a unique form of limited liability company (LLC) designed to provide a high level of asset protection and segregation for multiple businesses or investments under one parent 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 separate assets, liabilities, and owners.
The parent LLC is a master 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 Formation of Series LLC in Nevada
To start 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.
1. Choose a Business Name
To choose a business name that is available, you will have to go through a few steps. To start, know that 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 [1].
Related article: How to Change an LLC Name in Nevada
2. Appoint a Registered Agent
Appoint a registered agent to receive all your documents and notify you about important reminders.
A registered agent is a person with whom the Nevada Secretary of State has to maintain contact regarding business entities. The registered agent in Nevada 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 LLCs must appoint an authorized agent who will have all the required authority to serve this purpose.
In the state of Nevada, Northwest Registered Agent provides a superior registered agent service.
3. 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 Nevada series LLC, Articles of Organization have to be filed with the Nevada Secretary of State's office [2].
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.
You can learn more about the cost of forming an LLC in Nevada.
4. Create Operating Agreements
A series LLC 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 a series LLC 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.
5. 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) [3].
When forming a Nevada series LLC, you have to get an EIN for each protected series within your company.
If you need help getting an EIN number, IncFile is offering a great service.
6. Open Business Bank Accounts
Each individual series should have its own business 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.
Nevada Series LLC Taxes
The tax treatment of Nevada series LLC depends on the business activity of each series. Generally, series LLCs in Nevada pay Modified Business Tax based on their total income.
Additionally, Nevada series LLC 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 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 Advantages of Series LLC in Nevada
A Nevada series LLC offers various advantages.
1. Asset Protection through Series LLC
A 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.
2. Liability Protection and Simplified Registration
Apart from asset protection, another great feature of a Nevada series LLC is that it can provide liability protection.
For example, if you open a restaurant and someone gets sick from eating at your establishment, their illness could potentially lead to a liability lawsuit against your company.
Nevada Series LLC allows liability to be divided into separate cells, safeguarding assets.
Compared to other business structures, series LLCs simplify registration; once the master LLC is registered, new cells don't require separate processes.
3. Tax Benefits and Business Structuring Flexibility
Tax benefits are significant as each cell's income and losses are treated independently for tax purposes, potentially reducing annual tax bills.
The parent LLC files one tax return, while each cell has its own.
Additionally, series LLCs offer flexibility in business structuring, allowing you to choose single or multiple managers for all cells within the parent LLC, with different roles based on the liability cells they manage.
This makes the Nevada series LLC an attractive option for efficient asset protection and streamlined management.
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 Nevada Secretary of State, you don't have to repeat the process for each new cell you form.
The parent LLC files one tax return, and the profits and losses from each cell follow up on their separate tax returns.
The Disadvantages of Nevada Series LLC
The disadvantages of Nevada Series LLC are as follows:
- Increased complexity in bankruptcy and creditor claims: The series LLC can complicate matters for business owners, especially during bankruptcy or creditor claims.
- Underdeveloped laws leading to confusion: Nevada's laws governing series LLCs are still largely underdeveloped, leaving room for uncertainty and confusion.
- Higher maintenance costs: Maintaining these complex business structures often requires professional assistance, resulting in additional expenses.
FAQs
How Long Does It Take To Form a Nevada Series LLC?
Forming a Nevada Series LLC takes about one business day for online filings. However, paper filings may take up to three to four weeks to process, similar to a regular LLC.
How Do I File an Annual List in Nevada?
To file an annual list in Nevada, download the form from the Secretary of State website, complete it, and mail a hard copy.
Online filing incurs an additional charge on top of regular fees. One annual list covers the entire Series LLC.
What Is the Difference Between a Series LLC and Restricted LLC in Nevada?
The main difference between a Series LLC and a Restricted LLC in Nevada lies in their structure. A Series LLC can have multiple separate series with distinct assets and liabilities, while a restricted LLC is formed for a specific purpose, with limited distributions for return of capital only.
How Much Is a Nevada Series LLC?
The cost of a Nevada Series LLC includes $75 for Articles of Organization, $150 for the Initial List of Managers or Members, and $200 for the State Business License Application.
Additional business licenses may incur a $100 fee, making the total cost variable.
Nevada Series LLC - Is This Formation for Your Business?
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 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 ZenBusiness who knows LLC law inside out, starting your own business should not feel like too much work.
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References:
- https://www.chamberofcommerce.org/business-name-search-nevada
- https://www.nvsos.gov/sos/businesses
- https://www.irs.gov/
