The limited liability company (LLC) has been an incredibly popular business structure for decades, but in the grand scheme of things, it’s still a relatively recent addition to the American business landscape.
There are actually still new variations of the LLC popping up across the country, with the most popular one being the series LLC.
The series LLC is only available in certain states, including Nevada. A series LLC is a collection of LLCs that are grouped under one parent LLC. This enables businesses to separate different parts of the company into separate LLCs, allowing them to isolate the liabilities of each segment from the others.
Because the series LLC is still relatively new in some states, we get a lot of questions about what exactly the series LLC is, and how you can form one. That’s why we decided to write these articles, which break down how the series LLC formation process works in each state.
If you’re interested in forming a series LLC in Nevada, read on to find out how it’s done.
That said, if you’re looking for a time-tested way to protect yourself and personal assets as a business owner, the traditional LLC is the way to go. You can either form it yourself or through a free LLC service.
What Is a Series LLC?
Let’s start by briefly covering what a series LLC actually is. In general, a series LLC is exactly what it sounds like ― it’s a collection of LLCs that operate under the umbrella of a master LLC. While each LLC in the series is part of the larger company, this business structure also keeps each LLC financially insulated from the others. In theory, this means that a lawsuit against one of the LLCs should have no effect on the others in the series.
Each LLC in a series has the same limited liability protections that a standard LLC has, meaning that if you’re sued, creditors can only come after your business assets rather than pursuing your personal possessions. While a series LLC does still protect your personal car, house, bank accounts, etc., it also protects the other LLCs in the series from the lawsuit. In other words, creditors can only pursue the assets of one LLC, rather than the entire series.
Unfortunately, in our opinion, Nevada has some of the most confusing laws in the nation regarding series LLCs. Part of this confusion stems from the fact that Nevada refers to each individual LLC in the series as a “member,” which is the same word used to refer to each owner of the LLC.
Often, you will see the word “member” many times within the same chapter of the Nevada Revised Statutes, and the only way to figure out whether they’re referring to an LLC that’s part of a series or the individual person who owns that business is to use context clues.
For the sake of clarity in this article, we won’t use the word “member” at all. Read on as we clarify the rules and regulations as much as we can.
How Can I Form a Series LLC in Nevada?
Choose a Name for Your Series LLC
The first step to forming any type of LLC is to first select a name for your new business. You should choose a name that is memorable, and also one that briefly describes what your business does, or what your organization stands for. You will also need to run a business name search to make sure your chosen name is available in Nevada, and isn’t already being used by another company.
Also, you’ll need to include either the phrase “limited liability company” or the letters “LLC” in your business name. Finally, you cannot include any terms that refer to specific business types ― like “bank” or “hospital” ― unless you actually run one of those businesses, and you also can’t use any words that refer to other business types, such as “incorporated” or “inc.”
For more info on naming an LLC ― whether that’s a series LLC or a traditional LLC ― check out our comprehensive guide to naming an LLC.
Designate a Registered Agent
Next, you’ll need to choose a registered agent for your series LLC. The registered agent must have an office located in Nevada, and they must be available to receive document deliveries from the state during all standard business hours.
You don’t need to worry about designating different registered agents for each segment of the LLC, as Nevada requires that all LLCs in a series use the same registered agent. Your registered agent will need to fill out Nevada’s “Registered Agent Acceptance” form in order for you to be able to create a compliant series LLC.
Prepare and File the Articles of Organization
In some states, there are two different forms for creating traditional LLCs and series LLCs, but in Nevada, both types of LLCs use the same “Articles of Organization” form. The major difference in the preparation of this document is to indicate that your LLC is a series in Section 1, which gives your LLC the ability to form distinct LLC segments under your parent LLC.
Overall, the Nevada Articles of Organization document is a relatively simple form that only requires some basic information about your business. You’ll need to tell them the name of your series LLC, the name and address of your registered agent, your dissolution date if you only plan on operating your series LLC for a limited time, and whether your business will be managed by its owners or by a manager.
You also need to include the name and address of your owners (if you’ve chosen to have your owners manage the business) or your manager(s) (if you’ve chosen to have a manager manage the business). Then, your LLC organizer can sign the form.
Finally, you can file your Articles of Organization with the Nevada Secretary of State’s office, along with your $75 filing fee.
File the Initial List and State Business License Application
Next, you need to file the “Initial List of Managers or Managing Members and State Business License Application” form. This is a somewhat redundant step, because you also provide the state with a list of your managers and/or owners in your Articles of Organization, but it is nonetheless required. This filing has a $150 fee.
On the same form as your Initial List, you can apply for your general business license, which is strictly required to conduct business in Nevada. This license has a fee of $200.
Acquire an EIN
Next, you should obtain a federal tax ID number known as an Employer Identification Number (EIN) from the Internal Revenue Service for each LLC in your series. The EIN is essentially a Social Security Number for your business, as it is a nine-digit numerical code that you can use to identify your business on tax forms, and it also helps you open business bank accounts and hire employees.
It’s quite easy to get an EIN from the IRS. All you need to do is fill out the free form located on the IRS website, and you’re good to go. You will receive your number immediately upon filing.
Create a Series LLC Operating Agreement
In Nevada, you can form the individual LLCs within your series by describing them in your operating agreement — you do not need to file Articles of Organization for each separate LLC. The operating agreement is an internal document that also describes many other aspects of how your series LLC will operate. In this agreement, you’ll outline what the different segments of your series LLC are, indicate the roles of each owner, detail the owners’ voting rights, and explain the financial contribution and allocation plans.
You should also indicate whether you want your business to be managed by its owners or by a manager, discuss how an owner can be replaced if necessary, and outline a dissolution procedure in case you ever need to close up shop.
The ability to form LLCs within your series in the operating agreement is another point of confusion for series LLCs in Nevada. The state does not require LLCs to file an operating agreement, and they actually don’t even legally require you to create one in the first place.
Therefore, it’s hard to understand why Nevada set up their series LLC laws to allow the formation of each LLC in the segment by merely indicating their existence in an internal document, without filing anything with the state. In addition, there’s some confusion regarding the issuing of certificates of good standing for these LLCs. The state has no proof that these LLCs even exist, so how are they supposed to confirm that they’re in good standing? Unfortunately, this is a question that has no good answer.
Create a Financial Infrastructure
It’s crucial for any LLC to open a business bank account, as this helps you maintain the separation of personal and business finances that is required of all formal business entities. However, there’s an extra layer to this step for series LLCs, as you’ll need to open a bank account for the series’ parent LLC, as well as for each of the separate LLC segments under its umbrella.
If you fail to open a separate bank account for each segment, you will run the risk of losing the isolated liability of each LLC in the series. You need to be able to prove that these segments are truly separate if you want to maintain the liability shields between them.
In addition, this would be a good time to either hire an accountant or purchase accounting software for your series LLC. For traditional LLCs that don’t have particularly complex accounting needs, it’s usually sufficient to use accounting software, but a series LLC is a bit more complicated, and we therefore prefer hiring an accountant to make sure everything is done correctly.
Obtain Licenses and Permits
By this point in the formation process, you should have already acquired your Nevada business license. There are some other licenses and permits that apply in this state depending on your industry, but Nevada has far fewer of these licenses than most states, and it’s quite likely that you won’t require any of them. To make sure, you should visit the Secretary of State’s page on professional licensing.
Keep in mind that you may also need to get licenses or permits from your county or municipal government agencies, so make sure to check with the relevant entities in these jurisdictions.
Understand Maintenance Requirements
Instead of a typical annual report, Nevada requires all traditional and series LLCs to file an “Annual List of Managers or Managing Members and State Business License” form. This is exactly the same as the initial list you file when you form your series LLC, and it’s actually the same form as well. The filing fees are the same as well, as you’ll spend $150 to file the annual list and $200 to renew your business license for another year.
Can I Hire Someone to Form My Series LLC?
When forming a series LLC in Nevada, you generally have two options. You can tackle the DIY route, or you can hire an attorney. In some other states with series LLCs, you can form one by using Northwest Registered Agent’s formation service, but unfortunately they do not offer this service in Nevada.
Of these two options, we prefer hiring a lawyer. Yes, this can be an expensive route, but the series LLC is rather complex. Additionally, because Nevada’s series LLC regulations can be somewhat confusing, we think it’s definitely a good idea to hire a reputable business attorney to create your formation documents.
If you’re supremely confident in your abilities to form a compliant series LLC, we won’t stop you from giving it a shot. However, for the vast majority of our readers, hiring a lawyer is the smarter option.
The process of forming a series LLC in Nevada isn’t too terribly different from the formation process for a standard LLC. However, you do need to make sure that you indicate you’re forming a series LLC in the Articles of Organization, and that you indicate the formation of each LLC within that series in your operating agreement.
At the end of the day, if you want to skip the hassles and worries that come with forming your own Nevada series LLC, you always have the option to hire an attorney to handle it for you.
We hope this article helped you develop your understanding of how to form a series LLC in Nevada!