Why Form an LLC in Nevada?By Edward A. Haman, J.D.
Why Form an LLC in Nevada?By Edward A. Haman, J.D.
Nevada's reputation for business-friendly laws have made it a popular place to form a limited liability company (LLC). This is sometimes done by companies that primarily, or solely, operate outside of Nevada. If your LLC will be doing business in Nevada, and especially if its primary business will be in Nevada, then it is more likely that you can obtain some advantages by organizing your LLC there. But if your business calls another state its home, you'll want to take a close look at the advantages and the disadvantages of forming an LLC in Nevada.
Advantages of a Nevada LLC
For LLCs doing business in Nevada, the advantages are straightforward. These advantages are often advertised also as benefits for companies operating outside of Nevada.
Simple and Low-Cost Formation
Compared with some states, and especially nearby California, with its LLC startup fees of $890 or more, Nevada may be an easier and cheaper place to form an LLC. Forming an LLC in Nevada involves filing two forms with the Nevada Secretary of State. The first is titled "Articles of Organization-Limited Liability Company" and has a $75 filing fee. The second is called a "List of Managers or Managing Member and State Business License." This second form requires a $150 list fee and a $200 business license fee, and it must be filed within 30 days of filing the articles of organization. These forms may be found, and filed online, at the Nevada Secretary of State website.
Nevada has no income tax or franchise tax on LLCs. For LLC members, Nevada has no personal income tax, no inheritance tax, no estate tax, and no gift tax. However, a Nevada LLC will pay an annual business license fee of $200 and a fee of $150 to file an annual list of managers.
Also, depending upon the nature of the business, the amount of gross receipts, and whether the business has employees, the LLC could be subject to one or more of Nevada's various business taxes. These include a commerce tax, a modified business tax (or MBT), a sales and use tax, an excise tax, and a live entertainment tax. For more details, see the Nevada Department of Taxation website.
Confidentiality and Asset Protection
Nevada does not provide LLC information to the Internal Revenue Service (IRS). Unlike the case in many states, a Nevada LLC may be organized in a way that avoids disclosure of the owners. Articles of organization do not include the identity of the members, unless they are also serving as managers or they are listed as organizers of the LLC. An organizer is someone who signs the articles of organization as a person responsible for registering the LLC, but who need not also be a member. If the LLC is set up as manager-managed, rather than member-managed, members do not need to be listed. Anyone seeking to investigate the financial holdings of a member who is not also a manager or an organizer will not be able to obtain ownership information from Nevada LLC records.
Specialized Business Court
Unlike most states, Nevada has a special Business Court, where disputes are resolved by judges with expertise in business matters, not by inexperienced and unknowledgeable juries.
Nevada offers the ability to organize a series LLC, which allows a single LLC to have numerous divisions, or series. Each series operates as a separate entity, with its own assets, members, and limitation of liability. If one series is sued, the assets of the other series are protected. This business structure is commonly used by rental property owners, with each property owned by a separate series. Series LLCs are currently available in the following states: Alabama, Delaware, the District of Columbia, Illinois, Indiana, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Texas, Utah, and Wisconsin.
Disadvantages of a Nevada LLC
If your LLC's primary place of business is outside of Nevada, and if does most of its business in that home state, there are other factors to consider.
Multiple-State Registration and Reporting
A Nevada LLC will still have to register as a foreign LLC in its home state. This double registration results in multiple filing fees and annual reporting requirements. Also, in order to register in your home state, you probably need to obtain a certificate of good standing from Nevada, which will cost $50. You may need additional certificates for other purposes, such as to open a bank account.
Multiple Registered Agents
All states require an LLC that is registered in the state to have a registered agent—a person designated to receive legal papers in the event the LLC is sued. A Nevada LLC that conducts business in another state will need to have a registered agent in both Nevada and its home state. Fulfilling this requirement usually means hiring a company in Nevada to serve as your registered agent there.
In addition to annual Nevada fees of $350 for a business license and filing a list of managers, you will still need to pay whatever taxes are assessed by your home state for a foreign LLC.
Unless you are operating a type of business with a high likelihood of being sued, you will probably never need to use Nevada's special Business Court. Having disputes heard in the Business Court can give your LLC some legal advantages, but it can also be a burden to have to travel to Nevada for court appearances.
Advantages and Disadvantages Compared
While Nevada offers various advantages for LLCs, for most small LLCs not operating in Nevada, the disadvantages usually outweigh the advantages. For more information on Nevada LLCs, including forms, see the Nevada Secretary of State website.
This portion of the site is for informational purposes only. The content is not legal advice. The statements and opinions are the expression of author, not LegalZoom, and have not been evaluated by LegalZoom for accuracy, completeness, or changes in the law.