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By The Wyoming LLC Attorney Team

Aug 14, 2023
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Nevada Series LLC

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Summary

A Series Limited Liability Corporation is a unique business structure that allows you to divide your company into multiple parts called Series. The ability to create a series within an LLC can be useful for both tax and liability reasons. Each division in a Series LLC may have its own capital accounts. Find out more about Nevada Series LLCs by reading this article.

What Is a Series LLC?

Series LLCs were first invented in Delaware to help the mutual fund industry avoid filing multiple SEC filings for different classes of funds by keeping these filings all under one umbrella while allowing the individual funds’ activities to be conducted separately. This concept is similar to that of the segregated portfolio company or protected cell company which exists in offshore countries such as Guernsey, the British Virgin Islands, Bermuda, the Cayman Islands, Mauritius, and Belize.

A Series LLC is a type of Limited Liability Company that allows the segregation of businesses and their assets into different Series. Each Series can be treated as its own entity, which means that creditors and other claimants are limited to only recovering against assets in that particular Series, such as money, property, and even furniture. In general, this means that if one of your business ventures goes bankrupt or gets caught up in a lawsuit, it will never affect other parts of your business or the other companies owned by you in that Series.

It is a business entity that consists of several Series all under one “umbrella” or “parent” LLC. Forming a Series LLC can be an efficient and cost-cutting approach for managing complex businesses. This kind of structure allows for more limited liability, a big plus for any organization or company that deals with highly regulated industries or with customers who might be sensitive to privacy concerns. Depending on which state you choose to form your LLC, you may pay less to file the Articles of Organization for each Series under the umbrella than you would if you used a traditional holding company structure.

Each LLC in the Series operates independently but must operate under all rules and bylaws set forth by the parent LLC. Each company should keep its own records, but all financials will be consolidated into a single IRS return filed by the parent LLC at tax time.

The Series LLC structure has been recognized by some states, but not all. So, if you are interested in setting up a Series LLC and are located outside of Nevada, you should check with an attorney first to see if it is legal in your area before creating one.

While most states do not allow Series LLCs and many do not allow multiple member firms within a single legal entity, Nevada does permit this form of incorporation. It has, however, strict requirements as to how you can set up your business as well as what you must include in your articles so that it qualifies as a Series organization.

Some states allow Limited Liability Corporations with multiple partners to form Series entities within their legal structure. However, most states require these multi-partner entities to follow specific requirements when doing so, such as including an operating agreement, to qualify them as "Series" businesses governed by state law instead of federal law alone. Other types of state LLCs are available where there are no specific eligibility requirements for being considered a Series.

When you set up a Series LLC, you should also create a separate operating agreement for each subdivision of your company. This agreement should be similar to the LLC’s original operating agreement but will contain some important differences which your attorney will be able to offer you invaluable advice on.

Does Nevada Allow Series LLC?

Yes, Nevada does allow Series LLCs. Nevada is one of the few states that allows Series LLCs as an alternative to other types of legal structures like corporations or partnerships. Furthermore, the state also has specific requirements regarding how they are formed and maintained in addition to some unique benefits that are not available in other states, such as limited liability protection.

Start an LLC in Nevada

Which States Allow Series LLC?

The following is a list of the states that allow the formation of Series LLCs:

  • Nevada
  • Delaware
  • Illinois
  • Iowa
  • Oklahoma
  • Tennessee
  • Texas
  • Utah
  • Virginia

How Do You Form a Nevada Series LLC?

Here is how you begin with the formation of a Nevada Series LLC:

1. The first step in forming a Series LLC in Nevada is to file the Articles of Organization with the Secretary of State. This document must include the following information:

  • The name of your company
    The name of your company must include ‘Limited Liability Company’ or a variation/abbreviation of this such as LLC. In Nevada, some company names require further applications and approval. For example, if you wish to include ‘attorney’ in your company name, a lawyer may have to be a member of your LLC. Your name must also be unique in the state of Nevada and should not use language that could cause the business to be confused for a government organization such as ‘gov’.
  • Contact information
    You must share the location of your business, this should be your primary business address and not a P.O. box.
  • Registered Agent
    The name and address of your registered agent must be disclosed in the document. Your registered agent is the individual or company that will be accepting and managing paperwork on behalf of your LLC. As with your primary business address, the address of your registered agent must not be a P.O. box and should be a street address.
  • Company information
    You will also need to provide details about the nature of your business, including its purpose and any other factors that might affect its operations.

2. Next up is creating an Operating Agreement which dictates how each Series operates within its parent entity. It is basically like having rules for each room in your house, everyone knows what they are supposed to do while inside those walls. Similarly, boundaries should be reinforced in a Series LLC, as there is a chance of having more managers working under the same company name.

This document can be as simple or detailed as you like, but it will need to be signed by all owners and filed with the Secretary of State at some point before your Series LLC is formed. Once completed and filed, your Nevada Series LLC is ready to operate as a legal entity.

How To Use a Nevada Series LLC?

There are multiple ways businesses can utilize and benefit from using a Series LLC in Nevada. Examples of popular ways to do so include:

  • A Nevada Series LLC can be used to hold assets, such as real estate or intellectual property.
  • You will have more flexibility with whom you let into your LLC than with other corporate structures, such as corporations or partnerships because there are no restrictions on how many members can be added at any time. However, every member of the LLC is responsible for their own taxes, so if you happen to have multiple members, they must file separate tax returns and pay their own share of any deductions and credits. An example of this would be, if you own a real estate company and want to split your income between yourself and your spouse, you will need to set up two LLCs in a Series. One will be owned by you and one will be owned by your spouse. You can then use these companies as the basis for filing taxes together.
  • A Nevada Series LLC can be used for tax purposes. This is because they allow you to separate your personal assets from your business assets and limit any kind of liability. The biggest benefit of using an LLC is that it provides asset protection while still allowing you access to the funds inside the company if needed.

How Do Series LLCs Pay Taxes?

Two main types of taxes may apply to your Series LLC in Nevada:

  • Taxes on the Series. This type of tax is imposed on each separate Series within an LLC, and it is paid by members who own that particular Series. Each member must file an individual return for each separate Series he or she owns under federal and state law.
  • Taxes on the LLC itself, as opposed to individual ones. These are paid by all members of an LLC equally, regardless of which one they own personally or whether they have any taxable income from their ownership stake in their respective companies' profits or losses. In general, tax tends to be less overall on a Series LLC.

How much you will pay depends largely on where your company is formed as well as where it operates. If you are interested in forming a Series LLC in Nevada but are not sure how much tax burden would fall upon yourself versus everyone else involved, talking to a lawyer may be beneficial.

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What Are the Main Reasons for Forming a Series LLC?

There are several main reasons for forming a Series LLC. The most important reason is to reduce the liability of each Series and protect assets. Another reason is to provide privacy, although this is not as important as reducing liabilities or protecting assets because it can be achieved through other means. The last reason is to ensure that each Series has its own operating agreement.

You can also reduce the liability of each Series by creating different LLCs, each with its own separate assets. Owners can limit their own liability if one Series fails or is sued. If a particular Series was sued for breach of contract, the plaintiff would only be able to collect money from the assets of that subdivision. It would not be able to collect from any other Series in your LLC. This is especially useful for those eager to keep their company afloat.

Risks of Series LLCs

  • Loss of privacy: Since a Series LLC is a legal entity that can be owned by other people, this means the company itself does not have to disclose any information about its owners or managers. But, since other people are involved alongside yourself, you may lose some control over who knows about your business and how much they know about it.
  • Loss of control: You may also lose control over how other members of your Series LLC use their share in the company, especially if they are independent contractors rather than employees whose actions are controlled by contracts or employment agreements. In this case, there could be serious consequences if one member uses his or her share carelessly. For example, by mismanaging funds or damaging property.

In most cases, a Series LLC is a very effective way to protect your business from liability. But occasionally, things can go wrong. Before proceeding, we recommend you watch the following video Series LLCs to see if a Series LLC is right for you. If you decide that a Series LLC is right for you after watching the video, we still strongly recommend that you first speak with an attorney before setting up one in your state. If you do decide to form a Series LLC, consulting a great quality attorney who is experienced in the process, such as ourselves, can help you avoid these pitfalls.