Limited Liability Company (LLC)
Another business structure worth considering in Nevada is the Limited Liability Company. Just like with a corporation, the LLC protects your personal finances, home, vehicles, and other assets. In addition, both structures allow a business to borrow money and sell equity in order to raise capital. Both stay in existence until they are dissolved, without need for periodic renewal, and both LLCs and corporations need periodic renewal.
A limited liability company, or “LLC” allows for certain favorable tax treatments, as well as personal liability protection, for the “members” involved. It is important to note that the specific structure and status can vary from state to state so complete consideration of the state’s laws in which the LLC will be formed is crucial. An LLC as a business structure model allows for multiple owners, or “Members,” and a “Managing Member,” to enjoy limited liability. The Managing Member is typically the figure head of the organization and is responsible for it’s management. The profits or losses of the business organization pass directly through to the member’s personal income tax returns.
Both the S corp (but not other types of corporations) and the LLC offer pass‑through tax treatment when it comes to federal income tax.
The LLC is a little less formal in its requirements in terms of annual paperwork to be filed, Boardmeetings, and minutes to be recorded. And whereas you are limited to 100 shareholders with the S corp, there’s no limit to how many members you can have with the LLC. LLC’s do not have shareholders, but rather members that have a percentage of ownership based off of their contributions to the LLC.
Also, the LLC allows you to pass through more loss than the S Corp on your personal taxes, most notably when it comes to real estate.
Nevada Series LLC
Unlike a regular LLC that is a single legal entity with one set of owners (members) and one set of assets with each member having the same rights, obligations and ownership.
Nevada is one of just a few states that allow for the formation of a “series LLC.” The series LLC is a unique, flexible form of a limited liability company (LLC). The series LLC begins with the formation of a “container” LLC. The container LLC is formed to house various entities or “series” without requiring additional filings with the Secretary of State. In order to achieve optimum results, each series within the container LLC should operate independently and maintain separate books, records, bank accounts, operating agreements, etc.
Examples of How a Series LLC Might Be Used
One Entity with Multiple Related Business Operations
How would a series LLC be used? Let’s take a privately held company that’s a large volume manufacturer. It has its own retail stores to sell its goods and has its own fleet of trucks to provide transportation from the warehouses it owns to stores. If all operations were in a single entity, any liability arising from a trucking accident would expose all the company’s assets to potential liability.
Rather than the additional expense of forming, maintaining, and administering multiple LLCs or corporations, the company forms a series LLC with multiple series. One series manufactures the product. Another series owns and operates the retail stores while yet another series own the trucks and leases them to the company and hires and supervises the drivers. The last series owns the company’s real estate.
If the intent of the series LLC statutes are upheld when tested, any claim arising from the negligence of a driver should limit the claimant to the assets of the series that hires and supervises the driver and perhaps the series that owns the trucks, but not the other series that are established for separate purposes and had no involvement in the actions creating the claim. In short, a court would treat each series as if it were a separate legal entity for liability purposes.
Using a Series LLC for Multiple Investments
Another example of a series LLC use. An individual owns multiple real estate investment properties. Each property is a single asset in its own series. A claim arising out of any one property should not allow a creditor or claimant to reach the assets of any other series. If all properties were in a single LLC, all would be at risk for a claim arising out of any one property.
If one or more of the properties had different owners or ownership interests among the same owners, they could not be placed in a single LLC but could be placed in separate series because the owners (members) and their percentage interests in each series are not required to be the same.
If you’re considering forming a Nevada Limited Liability Company…We Can Help!