Nevada Series LLC: Everything You Need to Know
A Nevada series LLC is a company with a number of internal divisions, which have independent liability protections. 4 min read
2. Disadvantages of a Series LLC
3. Which Business Types Can Benefit From Filing as Series LLCs?
4. How to File a Series LLC
Update July 24, 2020:
A Nevada series LLC is a company with a number of internal divisions, which have independent liability protections. Each division or series can have different members, managers, assets, liabilities, and business purposes or investment objectives. However, it can save on state fees by filing as one limited liability company. The main benefits companies derive from filing as series LLCs is that any expenses, debts, and other obligations of any one division are only enforceable against the assets of that division, and not against the LLC as a whole.
Advantages of Series LLCs
- Each division's assets are protected from other divisions' liabilities in the same LLC.
- A series LLC allows the formation of a single entity with a number of different asset portfolios that different entities own and manage.
- The series LLC owners get considerable overall savings in filing fees and legal paperwork. The LLC is required to file just one Articles of Organization and get a single business license, which is renewable every year.
Disadvantages of a Series LLC
Legal Gray Area
Series LLCs are not commonly used by business owners largely because very little is known about managing such LLCs. Although the IRS published proposed regulations that explain the federal tax treatment of these LLCs, they are not binding laws. Therefore, the gray areas about the legal tax treatment of series LLC still exist. The resolution of a series of LLC affairs during bankruptcy is not known. In Nevada, the law does not state if series LLC has a right to file for bankruptcy.
Managing a series LLC can be a complex endeavor. The documents used to manage a series LLC have to be carefully drafted to comply with statutory requirements and to spell out clearly the assets and rights of the members and managers. Failure to follow these requirements might expose divisions in the LLC to liability from other divisions. The need to sign contracts, deeds, and notes in the names of each series and to maintain separate bank accounts for each series can also prove hectic.
The legal complexities of series LLCs normally necessitate hiring experienced lawyers to guide the formation and maintenance of the business.
Protection Is Limited by State
Most states in the U.S. do not have any legal framework for series LLCs. In such states, individual series are not protected from liability from other divisions.
Which Business Types Can Benefit From Filing as Series LLCs?
Using a series LLC is especially useful in real estate and trust estate planning. The LLC enables management to separate assets and limit to liability from other series.
How to File a Series LLC
The process of filing for a series LLC is similar to the process of filing a normal LLC. The main difference comes at the stage of filing the Articles of Organization. The Articles of Organization for a series LLC must mention the fact that the company has one or more liability shields in addition to setting out the relative powers, rights, and duties of the divisions.
Certain series LLC divisions may have more rights or powers and profit or loss obligations compared to others. For liability protection to be extended to all the divisions of an LLC, the following requirements should strictly be observed:
- The Articles of Organization of the series LLC should contain a statement that the company has one or more liability shields.
- The assets and recordkeeping of each series should be separate from the other series.
To form a single or a series LLC in Nevada, you must file the following with the Nevada Secretary of State:
- The Articles of Organization
- A filing fee of $75
- An Initial List of Managers or Managing Members
- $125 for filing the Initial List of Managers and Members
- A business license fee of $200.
To maintain an LLC in Nevada, each year, an LLC needs to observe the following:
- File the Annual List of Managers or Managing Members at a fee of $125.
- Pay the $200 for a business license.
Anyone contemplating forming a series LLC in Nevada should carefully weigh the benefits of that business type against its possible drawbacks. In some cases, the added costs and complexities associated with managing a series may outweigh the savings in filing fees. Such businesses are better off filing as multiple LLCs. Considerable savings are typically only realized if the series LLC is a large enterprise with several series.
A good lawyer can help you to decide whether a series LLC is in your best interests. If you need help with filing or maintaining a Nevada series 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.