An LLC is a Limited Liability Company. It is a legal business structure that combines the benefits of a sole proprietorship (or partnership) with the benefits of a corporation. Yet an LLC avoids the drawbacks of these two forms of doing business.
An LLC enjoys the simplicity of operating without too much formality like a sole proprietorship or a partnership. Yet unlike a sole proprietorship or a partnership, an LLC has some liability protections built into the structure of the organization. A sole proprietor is personally liable for business debts and any other claims against the business.
That is, the personal assets of a sole proprietor can be seized or liquidated to pay off any debts or lawsuits related to the business. However, the owner of the LLC cannot be expected to pay more than the share of their investment in the business. In addition, the personal assets of the owner of the LLC are protected from being seized or liquidated to pay off any claims against the business.
Like a corporation, an LLC enjoys limited liability protection in case of excessive claims against the business. Neither party can be personally held responsible for the debts or claims against the business. Most business owners will go for a LLC when they decide that they need the additional protection that sole proprietor does not provide.
There are also multi-member llc that acts as a form of partnership. LLC is different from s corp. We will cover that in our other article.
However, an LLC does not have to follow the multitude of formalities and heavy paperwork requirements of a corporation.
When it comes to tax treatment, an LLC has the flexibility to elect how it will be taxed. LLCs can elect to be taxed as S or C corporations. They also have the option to choose to be taxed as sole proprietors for single-member LLCs. Multiple-member LLCs can opt to be taxed as partnerships. However, sole proprietorships, partnerships, S corporations, and C corporations do not have the flexibility to be taxed as they wish. There are also income tax involved that needs to be filed.
They have to follow the rules set for them by the IRS. One of the advantages of creating an LLC in Nevada is that Nevada does not tax personal income or LLC profits. Therefore, it is a popular state to register LLCs.
In this in-depth guide, we’ll cover the entire LLC formation process. If you are looking for start a Nevada business, then this guide will help you navigate through the incorporation process at ease.
LLC Operating Agreement
An LLC Operating Agreement is a key document used by LLCs because it outlines the business’ financial and functional decisions including rules, regulations and provisions. The purpose of the document is to govern the internal operations of the business in a way that suits the specific needs of the business owners. Once the document is signed by the members of the limited liability company, it acts as an official contract binding them to its terms.
Who Might Need An LLC?
Anyone who runs a sole proprietorship or a partnership and wants to shield their personal assets from business-related claims and lawsuits is a good candidate for an LLC.
A sole proprietor can file to register as an LLC at any time of the year.
Anyone who is thinking about starting a small business is also a good candidate for starting an LLC. The limited liability protection is a valuable tool for new and small entrepreneurs.
It might also be a good idea to organize as an LLC if someone has to open a business in a location or industry that seems high risk or litigious.
Another thing to look into would be Nevada’s business portal called SilverFlume. The convenience of SilverFlume’s platform to small businesses is in its ability to be used as a one-stop shop for transactions with various governmental agencies. In turn, agencies can operate more efficiently and effectively by using the data captured by SilverFlume.
How Long Does It Take To Create An LLC In Nevada?
It usually takes between 2 days to 2 weeks to create an LLC in Nevada. Online applications can be processed within 2 days.
Applications that are mailed in can take up to 2 weeks. It costs $425 to file for an LLC in Nevada.
The State of Nevada does offer 3 levels of expedited processing of LLCs:
1) 24 Hour Delivery – For an extra $125, an LLC can be formed within a day.
2) 2 Hour Delivery – For an extra $500, an LLC can be formed within 2 hours.
3) 1 Hour Delivery – For an extra $1000, an LLC can be formed within 1 hour.
The state of Nevada processes and creates LLCs with great speed and efficiency.
If you need more information regarding the different levels, you can navigate to Nevada department of taxation for further guidance.
How To Create A Nevada LLC?
The process of creating an LLC in Nevada can be simplified by considering it as a 6 step procedure. The steps are briefly outlined below:
1) Choosing A Name For Your LLC.
2) Appointing A Registered Agent.
3) Filing The Articles Of Organization.
4) Preparing An Operating Agreement.
5) Obtaining An EIN.
6) Filing Annual Reports.
The steps outlined above provide us with some understanding of the process of creating an LLC.
Let us take an in-depth look at every step in this process. We will also consider the factors that affect each of the steps required for creating an LLC in Nevada.
1) How To Choose A Name For Your LLC?
Choosing a proper name for an LLC is important. A short, catchy name can be easy for customers to remember and contact for purchasing goods and services. A long and difficult name might not register in the minds of customers easily.
So if you are planning to use the name of your LLC as your trade name, then put some thought into naming your LLC.
Choose A Name
The first step is to choose a name for your LLC. Per Nevada law the name of your business must reflect that it is an LLC by using one of the terms or acronyms mentioned below:
- “Limited Liability Company”
- “Limited-Liability Company”
- “Limited Company”
- “LLC “ or “L.L.C.“ or “LC.” or “L.C. “
Check That The Name Is Available For Use
Upon choosing a name for the business, verify that the chosen name is available for use in the state of Nevada. Go to the Nevada Secretary of State website, and perform a Business Entity Search.
If the name is available then you can continue the process of applying for an LLC. If the name is not available because it is already in use by someone else, then go back to the drawing board and select another name.
Reserve The Name
To ensure that the name you have chosen for your business does not get taken by someone else before you register your LLC, reserve the name with the Secretary of State. For a $25 fee, you can file to Reserve A Business Name for up to 90 days.
Do Not Mislead The Public
The name of your LLC must accurately reflect the type of business it is doing. Do not use a name that can falsely imply that your LLC is a government organization to the general public. Specific words like “county”, “municipal” or “state” can mislead the public into thinking that you are providing a public service when you are not.
Do Not Impersonate Other Institutions
The name of your LLC is also not allowed to impersonate an institution that it is not. For example, you cannot use the word ”bank” or “insurance” as part of your LLC name if you are in fact not a bank or an insurance business.
In fact, there is a Restricted Word List maintained by the State of Nevada which restricts the use of certain words unless approved by the relevant state governing body. For example, to use the word ‘bank’ in the name of an LLC, one must get the prior approval of the Commissioner of Financial Institutions. To use the word ‘insurance’ in the name of an LLC, one must get the prior approval of the Commissioner of Insurance.
Words relating to professions in certain industries are also not available for use without the approval of the relevant state authority. For example, before using terms such as ‘realtor’, ‘engineer’, ‘architect’ or ‘CPA’ or ‘accountant’ as a part of the name of an LLC, one must get the approval of the state bodies that regulate these professions.
Licensed professionals like doctors, social workers, and architects who perform specialized services can set up a special type of LLC called a PLLC. A PLLC is a Professional Limited Liability Company.
A PLLC is a special designation that shows that the LLCs are being run by skilled professionals. PLLCs can protect individual members against the malpractice of other members in the PLLC. This is a major advantage of opening a PLLC for skilled professionals.
One Specialty Under One Roof
Licensed professionals who set up LLCs can only provide one type of service under one LLC. For example, consider a professional who is a doctor as well as a lawyer. They cannot provide both medical and legal services under one LLC. They will have to perform legal services under one LLC and medical services under another LLC.
Check For Trademarks
Even if you are allowed to establish an LLC with a particular name in the state of Nevada, if that name has been trademarked for use by someone else, you might not be able to sell goods and services under that trademarked name. You could be sued by a person or business that owns the trademarked name.
An LLC is a state level entity. However, trademarks are issued on the federal level and have federal protections. Therefore, it is a good idea to search the Trademark Database to ensure that your LLC name does not resemble a trademarked name. Consider trademarking the name of your LLC if it has not already been trademarked.
Check For Domain Names
If you want your website address to match the name of your LLC, then check to see if someone already owns a domain name identical to the name of your LLC. You may or may not be able to buy the domain name from the owner. The price of the domain name could be too expensive to purchase. Or the owner might not want to sell the domain in the first place.
Think about purchasing a domain name as soon as you settle on a unique name for your business. You can perform a Domain Name Search to see if the name of your LLC is available or not.
Using a Fictitious Business Name
LLCs do not need to use a FBN (Fictitious Business Name) or DBA (Doing Business As). However, if an LLC owner does not want to use the LLC name during the course of operating the business, then the owner can register to use a DBA or FBN. A DBA or FBN are also known as the trade name.
In Nevada DBAs or FBNs are issued by the county from which the LCC operates. A fictitious business name is not issued at the state level. However, the Nevada Secretary of State’s website provides information about filling for a Fictitious Business Name. A DBA or FBN has to be a unique name in the county that it is registered in.
Beware Of Using Similar Famous Names
If the name of your LLC sounds extremely similar to a popular or famous business, you can be sued by that business for trying to profit off their names. Large, well known companies tend to sue businesses whose names even slightly resemble their own names.
They will attempt to sue you even if your LLC is operating in an unrelated business. A big and famous brand has deeper pockets than most LLCs that are starting out.
Therefore, it will be prudent to prevent attracting unnecessary lawsuits by steering clear of famous name brands.
Beware Of Using A Name Similar To A Competitor
Think before you use an LLC name that is similar to the name of another LLC or business that is your competitor.
You could be sued by your competitor for impersonation. This is especially true if your competitor established their business before you established yours. Even if your competitor does not sue you, you could be unwittingly helping your competitor.
For example, customers might think that your competitor is just another branch or location of your business because both business names sound so similar. You can lose a lot of potential business when prospective customers or clients find it difficult to distinguish your business from your competitor’s business.
How To Apply For A Name For Your LLC In Nevada?
You can apply for a name for your Nevada LLC by using the state’s business web portal called Silverfume. You will have to sign up or sign in to Silverfume to begin the process of application.
Silverfume takes applications as well as payments for registering an LLC in Nevada.
If you are applying for a Fictitious Business Name in Nevada, then you will have to apply for the FBN or DBA through the particular county from which you will be doing business. Refer to the list from the state website to find the contact information for any county in Nevada.
Consider if you want to apply to trademark the FBN or LLC name. You can also purchase a domain to match the FBN or LLC name.
2) How To Appoint A Registered Agent?
After choosing the name of your LLC, you must appoint a registered agent for your business.
When filing an initial application for an LLC, the applicant must state the name, address, and contact information of the registered agent for the business.
What or Who Is A Registered Agent?
The state of Nevada requires that all LLCs have a designated registered agent. A registered agent is a person or business that is authorized to receive all legal correspondence on behalf of the LLC. A registered agent must be at least 18 years old and have a physical location with a verifiable address. An LLC cannot serve as its own registered agent.
Who Qualifies To Be A Registered Agent?
The LLC owner, another individual, or a commercial service, can be designated as the registered agent of an LLC. The registered agent must have a physical address in the state of Nevada. The registered agent must be able to receive legal paperwork or communication on behalf of the LCC during normal business hours throughout the year.
Since LLCs must have a designated registered agent, the owners of an LLC cannot deny that they received the legal correspondence that was sent to them. A registered agent is the recipient of all legal communications on behalf of the LLC.
Some registered agent services will help you with filing requirements and formation service as well.
How To Choose A Registered Agent?
Cost, privacy, and compliance are things to keep in mind when selecting a registered agent. If you have a personal, physical address in Nevada then you can easily serve as the registered agent for your LLC. Once your name is filed as the registered agent, your name is linked to the LLC. That is, this designation becomes a matter of public record.
If you would rather not link your name or personal address to the LLC, then choose another individual or a commercial service as the registered agent of your LLC.
Always get the consent of the individual you are designating as your registered agent.
Commercial services charge a fee to receive your legal correspondence. They usually structure their fees to reflect the level of service they provide. For example, they might charge extra to forward your mail to you.
Or they might charge extra to scan and email all your documents to you as soon as they receive them. They might provide additional administrative or legal services for an extra fee.
There are many registered agent services out there that you can select from. Take a clear look at their requirements and costs.
How About Out Of State Business?
Does your Nevada LLC have a business presence in other states as well? If so then you must designate a registered agent for every state that you operate in.
For example, if you operate multiple restaurants in multiple states under your LLC, then you will require a physical address for each state that you operate in. This way local state governments and other entities can send legal correspondence to your registered address.
Changing a Registered Agent?
When you are registering an LLC, you have to declare the name of the person or entity that will serve as the registered agent for your business. You could be unsure about who to select as the registered agent.
Yet until you designate someone as a registered agent on your application to file for an LLC, your application will not be accepted for processing. In such an event, you can appoint yourself as the registered agent to prevent the hold-up of the formation of your LLC.
Then once the LLC has been set up, you can file for a change or amendment to who will be your registered agent going forth.
3) How To File The Articles Of Organization?
The Articles of Organization is the actual application form that you file with the Nevada Secretary of State to form a Limited Liability Company in the state of Nevada.
The application form is available on the website of the Secretary of the State.
How To Access The Articles Of Organization?
The Articles of Organization is a packet of forms available for download on the website of the Secretary of the State.
There are two options for filing the Articles of Organization. You can either file your application online or print out the application and submit it physically.
Online Application – The application packet can be completed and submitted online on the state’s web portal called Silverfume. You can also submit the payment electronically on Silverfume.
Printed Application – There are several ways to submit printed applications. You can mail the completed application form and with a check or money order for payment to the address of the Secretary of the State. If you opt to pay with a credit card you will have to submit a completed copy of the ePayment Checklist with the completed application form.
You can also submit your printed application and payment in-person at the physical office of the Secretary of the State. You will be able to pay by check, money order or credit card (using the ePayment Checklist).
Printed applications can also be sent via fax. Again you will have the option of paying by check, money order or credit card (using the ePayment Checklist).
How To Complete The Application Forms?
The first and most important thing to do is to take your time and read the instructions on the application form. You can either type in the application form on your computer or you can print the form and fill it in ink.
Articles of Organization Form:
- Check the NRS-86 box on the application form (Articles of Organization).
- There are four different types of LLCs mentioned on the application form. However, the NRS-86 option is the correct option for a domestic local LLC.
- On Line 1, enter the name of your LLC.
- Do not forget to add a short or long form of the term LLC.
- Either enter one of these: Ltd. or L.L.C. or LLC or L.C.
- Or enter one of these: Limited-Liability Company or Limited Company or Limited.
- Skip Line 2.
- Skip Line 3.
- On Line 4, check one of the boxes.
- Check the left box if you are paying a commercial business to be your registered agent.
- Check the middle box if an individual other than you has agreed to be your registered agent.
- Check the right box if you are the registered agent for your LLC yourself.
- Enter the name of the registered agent in the next box.
- Or enter your title/position in the LLC if you are the registered agent.
- Fill in the address of the registered agent in the next boxes.
- Enter the mailing address if it is different from the physical address.
- Get the registered agent’s signature and the date of the signature.
- If the registered agent is not around then leave the date and signature fields blank.
- Remember to submit a separate signed form called the Registered Agent Acceptance form.
- Go to Line 5. Check the box designated for a member on the right if you have a single-member LLC.
- Check the left box if there is a designated manager within the company.
- Go to Line 6 and enter the names and addresses of each manager or managing member.
- Go to Line 7. Enter the date you have planned to dissolve the LLC.
- Skip Line 7 if you are not planning to dissolve the LLC.
- Skip Lines 8 -11.
- Go to Line 12. Enter your name, address and signature on the form.
Initial List And State Business LIcense Application
- Box 1, enter the name of your LLC.
- Check the Limited-Liability Company box.
- Skip to the next page.
- Enter the tile, name and address of every officer of the LLC
- Enter your title, sign and date the form at the bottom of the page.
4) How To Prepare An Operating Agreement?
An Operating Agreement is an internal document that specifies the duties and rights of the managers and members of the LLC. It also states how the financial and operational decisions of a company will be carried out.
An Operating Agreement is an optional document that an LLC can create and file internally with other confidential business records.
The state of Nevada does not require LLCs to complete an Operating Agreement regardless of how many managers or members the business has on board. The Operating Agreement is a document that does not have to be filed with the Secretary of the State.
However, once an Operating Agreement is signed, it becomes a live and legal document. A business that has multiple managers or members would most likely elect to draft an Operating Agreement.
This would be done so that there is a clear understanding of the role of every individual within the business. How profits are shared and how the business is managed are clearly laid out. How roles change when members and managers enter or leave the company has to be clearly outlined so that the organization runs smoothly. Since these issues do not concern single-member LLCs, most single-member LLCs do not bother drafting Operating Agreements.
While most single-member LLCs do not draft Operating agreements, it would be prudent for them to do so. An Operating Agreement for a single-member LLC shows that the LLC is a business entity that is indeed separate from the owner.
An agreement would show how the LLC owner plans and runs the business. This document establishes the separation between the owner of the LLC and the LLC itself. In the absence of an Operating Agreement, if there are claims against the LLC, it would be up to the state to decide whether the LLC indeed operates as a separate entity from the owner or as a sole proprietorship.
If the state deems that an LLC is a sole proprietorship then the owner will lose limited liability protections. That is, the owner will have to pay for business debts and lawsuits from his own pocket.
Methods of Preparing Operating Agreements
There are 3 methods for drafting Operating Agreements. The first method will require the owner or owners of an LLC to draft the Operating Agreement themselves. The second method involves purchasing and customizing an online Operating Agreement Template.
The third method requires hiring an attorney to draft an Operating Agreement. It must be noted that an Operating Agreement only has significance if it is signed by the members and managers of the LLC.
When To Prepare An Operating Agreement?
There is no requirement for when an Operating Agreement gets stipulated and signed for an LLC in the state of Nevada. However, it would be prudent to draft and sign an Operating Agreement sooner rather than later in case of legal problems or challenges.
5) How To Obtain An EIN?
EIN is short for Employer Identification Number. Just as a Social Security Number (SSN) identifies a unique individual, an EIN identifies a unique business. This is also used as a tax id for state filing.
Why Would An LLC Need An EIN?
Single-member LLCs are not required to have an EIN unless they plan to hire employees at some point in their business. However, when an LLC uses an EIN even when there is no need to do so, then the separation between the owner of the LLC and the LLC itself is demonstrated. Using an EIN for the business and an SSN for personal dealings helps an LLC’s owner to maintain the cover of limited liability protection in case of excessive claims against the business.
Banks normally require all LLCs to use EINs to open bank accounts. The best approach for this would be to use a business bank account. Even if a single-member LLC does not need to use an EIN for legal purposes, it will need to have one to be able to use a bank. All LLCs with employees and all multiple-member LLCs are mandated to use EINs by law.
The transactions involved in the business bank account must be filed for both state taxes and business taxes.
You can refer to the IRS website to obtain more information regarding filing taxes.
A benefit of using an EIN over an SSN on business documents helps to minimize the risk of identity theft for the owners of LLCs.
Where To Get An EIN?
EINs are issued by the Internal Revenue Service (IRS). Applying for an EIN online is a quick, easy and free process. An EIN is generated as soon as the application is completed. You can download, save and print the EIN confirmation notice. Present the document to banks or requesting authorities as needed.
Alternatively, you can print and complete an SS-4 Form. This form is a formal application for an EIN number. Fax or mail the form to the IRS.
An EIN for an LLC must be requested by an individual who has a valid SSN, EIN, or ITIN (Individual Tax Identification Number). That is, a person and not an entity can apply for EIN.
6) How To File Annual Reports?
An Annual Report or Annual List is a document that must be filed once a year to keep the LLC in good standing in the state of Nevada. The report includes a list of all the members and managers in an organization. The first report is included with and paid for with the initial application to register the LLC.
What Is The Real Purpose Of Filing Annual Reports?
Filing annual reports keeps the information or details of the LLC up to date. This way when the state, any person, or entity desires to communicate with the LLC, they can contact the LLC easily. Individuals and entities that have claims against an LLC are particularly interested in having the most up-to-date contact information about the LLC.
Filing annual reports helps the state of Nevada to keep track of the taxes that the LLC owes the state. Collecting taxes from the LLC is a source of revenue for the state of Nevada. You must get your tax returns correct and filings would need to be on time.
When Exactly Must The Report Be Filed?
Annual reports are due on the last day of the month of the anniversary of the LLC. The state usually sends a notice to remind the owner of the LLC that the annual filings and fees are due.
What Is The Cost Of Filing Annual Reports?
The total cost paid annually is $350. This fee allocates $200 for the state business license and $150 for the annual filing fee.
One can complete and submit the Annual or Amended List and State Business License Application form online at Silverfume. The payment can be submitted electronically on Silverfume as well.
Alternatively, the form can be downloaded, printed, completed, and mailed with the payment to the Secretary of the State. Of course, the form can be filled and submitted with a source of payment in person at the office.
What Is The Consequence Of Non-Compliance?
There is a $175 penalty for not filing the annual reports on time. Of the $175 fee, $100 is charged for the business license fee not being paid on time. Then $75 is charged for the annual list fee not being paid on time.
The state of Nevada can dissolve an&