Nevada LLC Operating Agreement: Everything You Need to Know
The Nevada LLC operating agreement is an internal document drafted by the organizer(s) of the limited liability company during the initial stages of setting up the business. 3 min read
2. Benefits of an Operating Agreement
The Nevada LLC operating agreement is an internal document drafted by the organizer(s) of the limited liability company during the initial stages of setting up the business. The operating agreement is used to outline, clarify, and strengthen the organizational structure of the limited liability company.
General Information About Drafting a Nevada Operating Agreement
In the state of Nevada, there is no legal obligation to draft/create an operating agreement. While not a requirement, an operating agreement serves as documentation outlining the relationship between the officials of the LLC and the business itself.
- The terms and conditions described in the operating agreement must be agreed to by each member. By having an agreement in place with all members in agreement with its contents provides you with legal proof that all parties involved with the LLC were made aware of the rules and regulations governing the operational structure of the LLC.
- When drafting the operating agreement, you have the opportunity to define the structure of working and financial relationships with other LLC members that suits the needs of your business.
- The operating agreement will have the percentage of ownership by each member of the LLC, how the profits and losses are distributed, the rights and responsibilities of each member and provisions should there be a need to change or transfer a membership.
- Additionally, the operating agreement will include the following: the name of the LLC as it has been registered with the state; formation date; agent designated for service of process; the term of the limited liability company; address of the business; process for admitting new members; process and rules for a member exiting the LLC; list of LLC managers; and a list of the members of the LLC.
- Review the information on the operating agreement and provide information for other areas such as formation, list of member capital contributions, and distributions.
- Read the remaining information in sections such as management, general provisions, and the list of valuation of members' interest.
- Complete the name and signature section. Provide all members with an individual copy to keep for their records.
Benefits of an Operating Agreement
Having an operating agreement is important because should the LLC become involved in a legal issue, you'll want the court to respect your right to limited personal liability. Other benefits include:
- An operating agreement lends credibility to your LLC as a separate entity.
- Creditors have become more adept at taking actions, such as foreclosure when attempting to take control of a limited liability company and seize its assets. To address this, Nevada has extremely tough laws regarding creditors by eliminating "creditor creativity."
- Per NRS-86.401, a charging order filed against a membership interest in a limited liability company is the exclusive remedy a judgment creditor has against a member to satisfy a judgment.
- Nevada Statutes NRS 78.105 and NRS 86.241 and SB60 2013 require all LLCs to maintain records at the office address they have registered on file, and that registered agents maintain records of all their clients.
- It is a sound move on the part of a business entity to maintain a copy of the operating agreement/bylaws and the membership list or stock ledger for an LLC.
- NRS 77.443 covers registered agents and the fines that can be imposed for non-compliance and/or their company registration being revoked.
- NRS 86.246 states the Nevada Secretary of State may request copies of a registered agent's membership listing and/or stock ledger as well as the LLCs operating agreement and bylaws.
- The operating agreement for Nevada LLCs is a legal document that serves as an agreement among its members.
- When a Nevada LLC creates an operating agreement, it establishes a degree of protection to its members should the LLC be faced with litigation. The protections are only in effect with the completion of the document.
- A single-member business is established by a sole proprietor. The operating agreement outlines the operations of the business and provides proof the owner is separate from the business.
- A multi-member business is for an LLC with more than one owner. The operating agreement outlines the operating procedures among its members.
- Creating a Nevada limited liability operating agreement is proof that either type of business is separate from the owners/members, which protects private assets from legal actions.
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