1. What Is a Limited Liability Company?
2. Forming an LLC in Nevada
3. Nevada Corporate Formalities Requirements
4. Advantages of Forming a Nevada LLC
5. Disadvantages of Forming a Nevada LLC
6. Single-Member LLCs in Nevada

What Is a Limited Liability Company?

Advantages of a Nevada LLC, or limited liability corporation, include the protection of the business owner's personal assets from business liability. Each state has its own laws that govern the formation and management of LLCs. While most LLCs are not subject to state tax, the owners are taxed on their share of business-related income. If an LLC opts instead to be taxed as a corporation, they are subject to federal and often state corporate tax rates. 

Forming an LLC in Nevada

Although Delaware has long been the state of choice for new businesses, Nevada is working to attract new LLCs to the state. New Nevada LLCs must pay a $125 formation fee if the company is valued at less than $75,000, along with an annual $85 corporate fee. To form an LLC, you need to sign the Nevada articles of incorporation and file them with the Secretary of State. This can be done online or over the phone, and approval is received within 24 hours.

Nevada LLCs are not subject to minimum corporate capitalization and do not require a minimum number of members. To receive optimal Nevada tax benefits, the corporation must be considered a resident and have a physical presence in the state. This requires:

An LLC that operates outside Nevada must weigh the cost of establishing a non-local entity against the tax advantages of being considered a state resident.

Nevada Corporate Formalities Requirements

Corporate formalities are the actions required by the state to maintain LLC status. These actions are designed to protect corporate shareholders from liability and include:

  • Corporate bylaws
  • Annual shareholder meetings
  • Accurate corporate minutes and records
  • Written records of all corporate transactions
  • Complete separation of stockholder and corporate funds
  • Filing an annual director and officer list

Advantages of Forming a Nevada LLC

Owners or board members of a Nevada LLC are not listed in public record, which means there is no personal connection if the LLC is sued. A Nevada LLC is recognized as a legal business entity by all 50 states.

Nevada LLCs are not subject to taxation on corporate shares or stock transfer; the state has no franchise, gift, business and occupation, inventory, or personal income tax. Payroll tax is equal to 0.7 percent of gross wages.

A sole proprietor who is not incorporated would be taxed at approximately 45 percent when FICA taxes are considered. Forming a Nevada LLC reduces the tax burden to just 15 percent of the first $50,000 in net income.

An LLC can have unlimited numbers of owners and investors, none of whom are required to live in or do business in Nevada. A Nevada LLC can establish a flexible income distribution policy and outline these guidelines in its operating agreement.

Although Nevada LLCs are required to have annual meetings, they can be held anywhere in the world or via teleconference. Stockholder and board member information is not provided to the IRS, and no company asset list is required as long as the company is not involved in fraudulent activities. LLC members can add another layer of privacy by using a nominee officer appointment, which acts as a stand-in for the actual director. The nominee has minimal authority to sign documents, does not control corporate funds or operations, and can be voted out of office by a majority at any time.

A Nevada corporation has the right to issue a series of stock with different values and rights as long as consistency exists within the series. These should be outlined in the articles of incorporation. They can also establish bearer shares, which indicate direct stock ownership by possession. These allow easy stock transition since they are not recorded in a stock certificate ledger.

Disadvantages of Forming a Nevada LLC

In Nevada, an LLC is automatically dissolved in the case of bankruptcy or death of a member. This means that if you plan to go public or issue employee shares, you may want to instead establish a corporation.

Single-Member LLCs in Nevada

As in other states, a Nevada LLC can consist of just one member. Business income and deductions are reported on his or her individual tax return.

If you need help with establishing a Nevada LLC, you can post your legal need on UpCounsel's marketplace. UpCounsel accepts only the top 5 percent of lawyers to its site. Lawyers on UpCounsel come from law schools such as Harvard Law and Yale Law and average 14 years of legal experience, including work with or on behalf of companies like Google, Menlo Ventures, and Airbnb.