Nevada Series LLC – An Overview
The state of Nevada allows the formation of a “series LLC.” But what is a series LLC, and how can it benefit you and your business?
A series LLC is a more flexible and unique limited liability company. Essentially, a Nevada Series LLC consists of a “parent” LLC, with added divisions, known as series, within the LLC. Each series can have separate finances, assets, and business purposes.
Since the primary goal of an LLC is to limit liability, it’s essential to know that the parent LLC is not liable for the debts of a series LLC within it. Series LLCs allow multiple businesses to find protection independently of one another. Therefore, if anyone files a lawsuit against any of the series LLCs or the parent LLC, this lawsuit will not affect the other businesses.
Each series LLC must operate independently of the others to maintain this protection. This means each series must keep a separate accounting with individual books, different records, and separate operating agreements.
However, not everything must be separate between the parent LLC and the series LLCs. As per Nevada Revised Statutes Section 86.231, all Nevada LLCs must have a Nevada registered agent—an official point of contact for legal mail and any correspondence from the Nevada Secretary of State.
When using Nevada Series LLCs, each series can share a registered agent with the parent LLC. The series LLC requires only one initial filing fee and one annual fee for the entire series, offering significant savings.
Pros and Cons of Nevada Series LLC
The benefits of a Nevada Series LLC include:
- Asset protection
- Reduced startup costs
- Less complex than a corporation with subsidies
- Less administrative tasks
- Lower sales tax
- Only the parent company must register with the state
- Single tax return
One of the best benefits of a Nevada Series LLC is organizational streamlining. The parent LLC is the hierarchy for the series LLCs. You can delegate duties and tasks to separate managers of each series as a method of managing multiple properties most effectively.
The negative aspects of Nevada Series LLCs include:
- Significant accounting tasks due to separate accounting and books and records
- The cost of forming a series LLC can be higher than a regular LLC
- Because series LLCs are relatively new, some legal questions regarding bankruptcy have not been thoroughly answered
- Taxes can be complex, if the series LLC has multiple different members
It is still unclear how the IRS and state tax departments will treat series LLCs because states lack uniformity. Some states treat a series LLC as one taxable entity. Others view the series LLC as multiple taxable entities. The IRS has not issued final rules regarding the tax treatment of series LLCs but has issued proposed regulations. Taxes could become more burdensome for large series LLCs.
What Businesses Benefit Most from a Nevada Series LLC?
Income-producing real estate holdings, such as rental properties, can benefit significantly from a Nevada Series LLC. Other businesses that could benefit from a Nevada Series LLC include trucking, taxicab companies, and franchisees.
For example, Seven Springs Real Estate sets up its Articles of Organization and Operating Agreement to allow for the creation of series LLCs within its structure. Seven Springs Real Estate can then purchase ten rental properties, creating the title to each as Seven Springs Real Estate, LLC Series 1, Seven Springs Real Estate, LLC Series 2, and so on. As long as each series has a separate operating agreement and management treats each business separately, the liabilities of one will not affect the others.
Forming a Nevada Series LLC
When you choose to form a Nevada Series LLC, you must do the following:
- You must draft an operating agreement for the parent LLC, setting forth how the parent LLC will be run, along with the roles and responsibilities of members and managers. Then each series LLC will need its own operating agreement to define any unique rules that apply to it. The operating agreements for the series LLCs do not have to be filed with the state but must be maintained with the records of the series LLC.
- EINs must be obtained for at least the parent LLC from the IRS
- A registered agent for each series LLC must be appointed
- Permits and business licenses must be obtained
- Business bank accounts must be set up for at least the parent LLC
Before you decide to implement Nevada Series LLCs, you must speak to a knowledgeable Nevada attorney.
Looking for a Nevada Business Formation Attorney?
If you have questions about whether a series LLC is right for your business, call our law firm immediately. We can help you evaluate your needs and help you make the choices that will best protect your assets and your business’s long-term goals. We know Nevada business formation laws, and we use this knowledge to help our clients achieve their goals.
Call John Park Law at 702-857-7879 to speak with an experienced Nevada business formation attorney today. You can also fill out our confidential contact form, and we will call you back.
John Park is a highly experienced attorney in estate planning, probate, business law and guardianship to help people organize the elements of their lives through careful estate planning and asset protection measures.