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Nevada LLC Asset Protection

Date: 11/12/2019 | Category: | Author: Martin Pouzar

HOW DOES BUSINESS ASSET PROTECTION WORK WITH NEVADA LLCS

A small sized start-up or a medium sized business planning to register in Nevada will definitely enjoy the many benefits the state offers in terms of taxes and business incentives. There is though a consideration that most businesses are required to make, which is the organizational type or form. A Limited Liability Company is most opted form of business due to the asset protection Nevada LLC benefits that its owners or members enjoy. The question is how asset protection works in Nevada and how a business can benefit from it.

Protecting Assets by Forming Nevada LLC

Nevada is considered as one of the most favorable destinations for forming an LLC. Apart from the salient benefits the state provides, “limited liability” in itself is one of the greatest assets a Limited Liability Company can enjoy. Limited liability in the simplest of words translates to separating business assets from personal assets, so that creditors of the business are unable to touch personal assets. This is an integral part of asset protection Nevada LLC although some states like Nevada also have other types of asset protection plans to help businesses.

Since a long time, asset protection has been an integral part of estate planning as trusts for members of a family are there to protect and preserve asset or property for use and benefit in the future. The question is – does this work for businesses as well?

When a business starts operating, at some point there is bound to be wealth creation and accumulation. The accumulated wealth creates the greater concern, which is losing it. Hence, there has been increasing emphasis on asset protection Nevada LLC. A Nevada Limited Liability Company plays a dual role when it comes to planning for asset protection and they are:

  • Internal Trap: A Nevada LLC has been designed to trap any liabilities connected with business or asset. It traps them inside the entity itself and as a result, a member of the said LLC is not personally liable for such a liability.
  • External Insulation: A Nevada LLC has the power to insulate its assets from the creditors of each individual member and thus protecting member assets.

Nevada LLC – Popular for Asset Protection

There are several states that provide asset protection and yet, asset protection Nevada LLC is considered as the most popular. It is more so because the Silver State has some of the best protection laws in the nation for limited-liability companies. At the same time, it is important to understand that in order to maximize asset protection benefits in the state, a business entity will be required to obtain utmost protection possible. How do you obtain high degree of asset protection?

In order to enjoy asset protection Nevada LLC fully, you will have to consider your liabilities in advance so that you are able to structure and fund the limited liability company (LLC). The liabilities to consider are:

  • Liability related to business debts: these types of liability are those that arise from LLC transactions
  • Liability related to personal debts: these types of liability are those that arise from debts incurred due to personal or non-business activities.

Most often than not, businesses have the misconception that all assets within an LLC would automatically be protected from debt or liability but that is not the case; you need asset protection Nevada LLC plan to ensure that protection. This is not all, business owners may not realize but the greatest risk to their assets is from business and not personal transactions. The good news is that Nevada asset protection options provide a Limited Liability Company with the platform to structure and operate in a manner that will negate the risk of assets being exposed to liability.

Nevada Law for LLC

Nevada is one of the few states considered to have a strong legal environment that is pro-business. The 2017 Nevada Revised Statutes, Chapter 86 – Limited-Liability Companies, NRS 86.371 states that a member or manager of an LLC formed under Chapter 86 of NRS cannot be held liable for any debt or liability of the business entity. This is an integral part of the asset protection Nevada LLC laws.

The Nevada laws are favorable when it comes to asset protection and this is largely due to a provision that exists for the creation of a domestic asset protection trust (DAPT). Currently there are 17 states that have DAPT laws and this includes asset protection Nevada LLC laws. DAPT jurisdiction in Nevada is the strongest as compared to other states because of specific features mentioned in NRS Chapter 166.

There is a provision in Nevada law for asset protection Nevada LLC through a Charging Order. This order provides protection to assets by allowing a judgment creditor to receive distributions from a Nevada limited-liability company just the way a judgment debtor would receive. The laws of the charging order are governed by NV Rev Stat § 86.401 (2013). Let’s look at the following example to understand this well:

A creditor of a Limited Liability Company obtains a charging order from the Nevada court or local jurisdiction ordering the LLC to pay any distributions of property or money amounting to $40,000. In such a scenario, if there are no LLC distributions then payment would not be possible. As a result, the assets of the said LLC would be protected.

Protecting Personal Property

Although, a charging order may provide some relief to an LLC but not always, as a court order does have the power to freeze all your assets. How do you protect personal property in Nevada?

What is personal property? It is defined as any property or asset that you own excluding real estate. It could be your bank account or jewelry or even stock certificates and intellectual property. In order to understand asset protection Nevada LLC, you have to understand the fact that creditors find specific assets to be more attractive and valuable as compared to others. At the same time, creditors also consider the liquidity of a specific asset for satisfying the lien or judgment brought against the LLC.

Once you have registered your Limited Liability Company in Nevada, the asset protection Nevada LLC laws will come into effect. Your assets or personal property that has been transferred to the LLC will receive the same protection as your business. As a result, the probability of your business being exposed to liability or getting sued is reduced considerably. Even if a creditor obtains a charging order to satisfy the judgment using LLC’s assets, he or she will be entitled to the LLC distributions only.

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Asset Protection Trust in Nevada

Before you can think of asset protection Nevada LLC option, you need to identify, discuss, and then implement an asset protection strategy. Although, there are no specific trusts for a limited-liability company in Nevada but you can always opt for the Domestic Asset Protection Trust (DAPT). What is a DAPT?

A Domestic Asset Protection Trust is a type of irrevocable trust that allows the trust creator to become a discretionary beneficiary and at the same time offers significant protection to the assets held in the trust. There are features of NRS Chapter 166 that imparts immense value to the DAPT and asset protection Nevada LLC. The features are:

  • Statute of Limitations Period: A DAPT jurisdiction like Nevada has a statute of limitations period, which should expire so that any assets in this trust can be protected from the creditor. Nevada has one of the shortest periods.
  • No Exception Creditors: Nevada is one of the two states where no statutory exception creditors are applicable. This simply means that an exception creditor is someone with the ability to access DAPT assets post the statute of limitations period.

There is another type of asset protection Nevada LLC option that businesses can explore. This option is known as the Nevada Asset Protection Trust (NAPT) and it requires the LLC to transfer its assets into the NAPT, which is also an irrevocable trust. The NAPT provides insulation to LLC assets from any future judgments, lawsuits, and creditors. In order to operate this trust, an LLC will need to meet certain requirements like one of the trustees needs to be a Nevada resident.

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Nevada Series LLC

Date: | Category: | Author: Martin Pouzar

NEVADA SERIES LLC

If you are planning to set up a business in Nevada and want to take advantage of asset protection laws in the state then you can opt to form a traditional Limited-Liability Company or a Series LLC governed by Chapter 86 of the 2017 Nevada Revised Statutes. Let’s try and understand the difference between either forms of LLC.

What is Nevada Series LLC? How it differs from Regular LLC?

Nevada is one amongst 14 jurisdictions in the nation to have adopted statutes that provide for the formation of a series limited liability company. A series LLC abbreviated as an SLLC; is a type of limited liability Company providing liability protection across several series. In simpler terms, it can be defined as a single entity that constitutes separate assets, management, members, liabilities, investment objectives, and ownership structures.

The assets of each series, also known as divisions are protected from liabilities of the main LLC as well as other series or divisions. The structure of a Series LLC is hence quite different from that of a traditional LLC. This type of limited-liability company structure is quite an uncommon option for businesses as there is a lack of clear guidance from the judicial, legislative, and regulatory body. Perspectives are changing now as the IRS has proposed regulations indicating that IRS considers a series limited-liability company as a legitimate structure.

Now that you know what a series LLC is, ever wondered how it is different from a regular LLC? One of the biggest differences between these two types of LLC is that a series limited liability company will allow you to compartmentalize or segregate your assets. Hence, this form of limited-liability company provides a business with the best possible asset protection in Nevada.

Series LLC Benefits

As compared to the traditional limited liability company, a Series LLC registration in Nevada will allow businesses to enjoy a different set of benefits although some advantages are similar. One of the salient aspects of a series limited-liability company is that the benefits would be long-term, so that it can support sustainability and enable overall growth of the business. Here’s a window into the different benefits for a start-up business in Nevada.

Asset Protection

The first and foremost benefit that a business entity will enjoy post series LLC registration in Nevada is “asset protection”. The concept of a series limited liability company is quite well suited for different types of assets that an LLC owner or members may have including real estate. This type of LLC comes with a protective shield for all internal liabilities. This shield allows owners or members to segregate assets into multiple series. As a result, exposure of assets to liabilities is reduced considerably.

Here’s an example: ABC LLC owns a Fast-Moving Consumer Goods (FMCG) business and has its own fleet of transportation vehicles to transfer products to the market. A small accident of even a single truck or transportation vehicle can increase liability of ABC LLC but if the same company forms a series LLC for each section or activity that the business is involved in then it will restrict the liability to that activity or section. If the production is one series and transportation is another series then an accident on either of the series or divisions will not hamper the entire company. As a result, the entire company cannot be sued.

Independent Structure

A series LLC registration in Nevada simply means that there is a parent LLC and there is sub-llc within the parent LLC. It should not be confused with a “parent-child” relationship of the series but should be considered as a horizontal relationship (siblings). At the same time, each division in the series limited-liability company has its own profit, loss, and liability. It is also separate from other divisions legally and in economic structure.

An example of a business that will benefit through series LLC registration is a property management company, which owns multiple properties. In such a company, each of the properties can be an independent cell or division under the parent SLLC.

Low cost of startup

One of the finer aspects of series LLC registration is low cost of startup. An SLLC will require a single filing fee even though it has multiple series. It can easily be set up by a Nevada registered agent like IncParadise at lesser cost as compared to setting up multiple LLCs.

Lower Complexity

A series LLC registration has a less complicated structure as compared to corporations. An SLLC will not have complexities in structure, taxes or even document formalities.

Tax Return

Even though a Series LLC constitutes multiple series or divisions, only the parent LLC will need to file a tax return and not each division.

Risks of Series LLC

There are provisions for series LLC registration in Nevada Revised Statutes as seen in NV Rev Stat § 86.296 and NRS 86.296(3) yet there is not enough detail regarding their operations. This is mostly due to the fact that they are considered to be in their legal infancy stage and have been adopted in only one-third of the states.

Since there is a cloud of uncertainty around the operations of the SLLC, there are certain risks that businesses need to consider prior to Nevada series LLC registration. Some of these risks identified are as under:

  • Taxation: One of the prominent issues that pose a risk to series LLC is payment of Federal tax. The procedure is quite complex. Apart from this, the tax treatment of a series limited-liability company and by the IRS as well as state tax departments is quite unclear due to the lack of uniform tax guidelines.
  • Bankruptcy: The Nevada Series LLC laws surrounding Federal Bankruptcy provides no guidance whatsoever. This is due to the fact that the U.S. Bankruptcy Code has not recognized the Series limited liability company. As a result, there is a lack of consensus on whether an SLLC should file bankruptcy in a series or as a single entity.
  • Registered Agent: Unlike in traditional LLC, a series LLC registration will lead to each series or division being managed by separate registered agents. This could lead to higher expense of hiring additional agents.
  • Banking and Accounts: A series LLC has multiple divisions and each division needs to have a separate bank account. Since, each series will have their own financial statements; they need to have separate accounting as well. The greater the number of LLC’s in a series, the bigger the administrative issues.
  • Governing Documents: It is imperative that the governing documents for series LLC registration are carefully drafted. These documents should take into consideration specific statutory requirements of NRS 86.296(3). Even the slightest mistake could hamper the formation of such an entity.
  • Operation in another state: This is an area of concern for a Nevada series LLC. If such a business plans to operate outside of Nevada, especially in a jurisdiction that does not have a series LLC statute then the court in such jurisdictions will not recognize such a business entity.

Series LLC Requirements & Registration

A limited-liability company in definitely beneficial for businesses looking at asset protection but what is the process for Nevada series LLC registration? The process is as under:

  • In order to form an SLLC in Nevada, you will be required to file “Articles of Organization” for establishing an umbrella or master Limited Liability Company.
  • The Articles of Organization and Operating Agreement of the LLC should contain the following information:
    • A statement confirming the master LLC will have multiple series
    • A statement of series LLC registration setting forth the powers, rights, and duties of the series
    • A statement indicating that the rights or powers of each series is provided in detail in the Operating Agreement of the LLC

It is important to note that a Series LLC is not considered as a separate business entity under Nevada Revised Statutes.

Taxation for Series LLC

When it comes to taxes, does taxation for a series LLC work in a different way as compared to traditional LLC? Do you need to pay federal taxes or state taxes? These are some of the questions frequently asked by business owners planning to form a series limited liability company. So, let us look at what tax obligations does SLLC have.

If we look at a series LLC from the point of view of Nevada state law then the series limited liability company is not considered as a separate entity but in the case of taxation things are beginning to change. Recently, changes in federal tax regulations have been proposed that would treat each series in a series LLC as a separate entity when it comes to payment of federal income tax. This is governed by Proposed Reg. §30.7701-1, 75 Fed. Reg., 55,699 (2010). These proposed regulations are applicable to a series that has been created by a “series organization” pursuant to state specific series statutes.

The above is a proposed regulation only and therefore a series LLC would have to report as a single entity in the state of Nevada. You can form LLC in Nevada as the first step towards starting a series.

Difference between series LLC and a Restricted LLC

The business structure of a limited-liability company is undergoing a vast change and this has allowed different states including Nevada to create different types of LLC. These LLC’s are being created to offer a variety of benefits to businesses like asset protection and tax benefits. The two new types of limited liability companies that are accepted in the state of Nevada are Series LLC and Restricted LLC.

The Notable Differences

Since Series LLC and Restricted LLC are two forms of a limited-liability company, how are they different?

  • Acceptance: The series LLC registration is possible in 17 states but a restricted LLC can only be formed in Nevada. A restricted LLC is a limited liability company that is organized and exists under chapter 86 of Nevada Revised Statutes. It is an LLC that elects to include the optional provisions as permitted by NV Rev Stat § 86.161 (2015).
  • Structure: A series LLC is a type of master LLC that constitutes several sub LLC’s or a series of business divisions with separate members or managers and assets. A Nevada restricted LLC is like a traditional LLC and does not have separate members or assets under divisions or series.
  • Distribution: A series LLC does not have restrictions when it comes to making distributions. As the name suggests, a restricted LLC however has certain restrictions like it cannot make any distributions to its members or managers prior to 10 years of existence. Of course, this type of restriction has its benefits as it provides a favorable tax treatment to the members.
  • Tax free Interest: A series LLC does not have a “tax free interest period” but a restricted LLC has such a period. If the interest generated from a restricted limited-liability company is gifted to family members then that interest will be tax free for a specific period of time.
  • Liability: A series LLC has been created specifically to protect assets and minimize liability but a restricted LLC faces the same liabilities as that of a traditional LLC.

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Nevada LLC Law

Date: | Category: | Author: Martin Pouzar

NEVADA LLC LAW

Nevada is one of the few states that provide a business friendly climate and a strong Nevada LLC law that intends to protect a business enterprise and provide valuable information regarding its formation and operation in the state.

An Introduction – Nevada LLC Act

The current Nevada LLC Act is known as the 2013 Nevada Revised Statutes, Chapter 86 – Limited-Liability Companies. Some of the most important laws related to the functioning and existence of a Limited Liability Company were first defined in the Nevada statutes between 1991 and 2001. The Chapter 86 – Limited-Liability Companies were added to Nevada Revised Statutes in 2005.

What does the Nevada LLC Law comprise of? It provides important information pertaining to operations, filing requirements, fees, agents, provisions, business name, registered agent, organizational existence, general powers, operating agreement, management, capital, profit, liability, and dissolution among others.

The primary objective of the Nevada LLC Act is to help businesses to legally operate in the state. The NRS86 of the Nevada Revised Statutes are considered to be pro-business and thus enables a business friendly legal as well tax environment. If you are planning to establish your business in Nevada then you will be required to file necessary formation or registration paperwork and meet requirements as specified by the Nevada Limited-Liability Companies Act.

Nevada LLC Name Requirement

The Nevada LLC name requirement is an important aspect of business formation in the state and it is governed by Chapter 86 of the Nevada LLC Act. Naming requirements for a business entity can be categorized under two subsections and they are:

  • Naming Guidelines
  • Name Availability Check

Naming Guidelines

A business name is integral to any organization and is one of the most important aspects of forming an LLC in Nevada. There are certain naming requirements governed by the Nevada LLC Law that businesses will have to comply with in. Let us look at the key naming guidelines as set forth in the 2013 Nevada Revised Statutes.

  • The name of your business entity must contain phrases like Limited-Liability Company, Limited Liability Company, Limited Company or Limited. The name may also contain abbreviations like L.L.C., Ltd., LLC or LC. The word “company” can also be abbreviated as Co. This is governed by Nevada LLC Act – NV Rev Stat § 86.171 (2013).
  • The proposed name of your business entity should be distinguishable from any other name on the records maintained by the Secretary of State.
  • The business name should not contain words or phrases that could be confused with government agencies like state departments, treasury, department of taxation etc.
  • The Nevada LLC Law, Title 7 of the Nevada Revised Statutes, advocates that the usage of certain words in a business entity name may be restricted.

Note: If you are planning to form a professional limited liability company then the naming guidelines according to Nevada LLC Act must contain specific words and phrases. The name should contain words like Professional Limited Liability Company or abbreviations like “Prof. L.L.C.,” “P.L.L.C.,” or “PLLC”.

Name Availability Check

Once you have identified a business name that is compliant with all requirements of the Chapter 86 – Nevada LLC Act, the next step is to check if the chosen name is available so that you can reserve it with the Secretary of State.

You can use the state portal for Nevada Business Search to check the availability of your chosen business name. In order to accomplish an effective search, you will have to do type the business name without any identifiers like L.L.C or LLC as mentioned in Nevada LLC Law. This search will return names that are either the same as chosen by you or similar. Let’s look at an example:>

  • If you search the name “Ibiscus” and choose the option “Name Starts With” then it will show the result as -“No records found with your search criteria.”
  • If you search the name “Ibiscus” and choose the option “Name Contains” then it will show the result as – “Your Search Criteria returns 300 results”. It will show information like Name of the business entity, its status, filing date, type of entity, business ID and entity number.

It is highly recommended to conduct a detailed search using all possible parameters prior to applying for name reservation.

Articles of Organization Requirements

You can form any type of business in the state of Nevada but if you are planning to start a Limited Liability Company then Chapter 86 of the 2013 Nevada LLC Act requires a business to file specific documents related to the formation. The most important document for new business registration in Nevada is Articles of Organization, which has to be filed with the Secretary of State along with the required fee.

There are certain provisions that has been set forth by NV Rev Stat § 86.161 (2013). This chapter of the Nevada LLC Law requires a business entity to provide specific information regarding the organization. The Articles of Organization should contain the following:

  • Name of the limited-liability company
  • Name and address of the registered agent of LLC to enable service of process
  • Name and address of the owners, members or managers of LLC
  • Statement providing information of the company being managed by one or more owners, managers, and members.
  • Statement providing information setting forth the relative rights, duties, and powers of the series

You can file the Articles of Organization through mail, by hand, and online.

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Nevada LLC Members Information Requirements

There are several advantages of forming an LLC as the Nevada LLC Act does not require it to follow the same rigorous operational requirements as is the case of a corporation. At the same time, an LLC can have a single owner or multiple owners often known as members. One of the salient aspects of a Nevada LLC is that the state does not require owners or members to be a resident of the state.

The Nevada LLC Law also allows a Limited Liability Company to employ non-economic members. Such members will not own any portion of the LLC but will still have voting rights of economic members. There are specific Nevada requirements for LLC members governed by NV Rev Stat § 86.291 – § 86.326 (2013) that need to be met and these are:

  • Nevada LLC Act states that a Nevada Limited Liability Company should have at least one member or manager
  • All members of LLC should be 18 years of age or older
  • An LLC in Nevada will have to provide a list of LLC members within 30 days after it has been formed or registered. This list is also known as the Initial List
  • Nevada LLC Law requires names and addresses of members to be listed in the Articles of Organization
  • The members and their rights, powers, and duties need to be mentioned in the operating agreement.

Asset Protection for Nevada LLC

One of the salient benefits of forming an LLC in Nevada is their “Asset Protection law”. The Nevada LLC Act does not require businesses to list company assets hence a member will not be responsible for any liabilities of the LLC.

In the state of Nevada, a business will enjoy favourable laws related to asset protection and will be able to create an asset protection trust. Since this protection trust is under the purview of Nevada LLC law and Nevada asset protection statutes; it will protect members or the LLC assets from creditors seeking to pursue a legal case.

The Nevada asset protection trust provides protection to a wide variety of assets including personal property, family heirlooms, real estate, bonds, stocks, and cash among other assets. There is another asset protection option and it is known as the “charging order”. The strong and pro-business Nevada LLC Act provides the opportunity to single-owner and multi-owner LLC’s to use the charging order for protecting assets.

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Nevada LLC Taxes

Date: | Category: | Author: Martin Pouzar

NEVADA LLC TAXES

A limited-liability company is a form of business entity, often considered to be a private limited company. It provides businesses with numerous benefits including limited liability, flexible management structure and no double taxation on LLC distributions. The working of an LLC in the “Silver State” is governed by the Nevada Revised Statutes and this includes annual requirements and Nevada LLC tax.

Introduction – Nevada LLC Taxes

Nevada is a popular state for business because it has virtually no “state level” Nevada LLC tax. Some of the taxes not applicable to business entities include:

  • Corporate income tax
  • Franchise tax on income
  • Personal income tax
  • Unitary tax
  • Admissions tax
  • Gift tax or estate tax

Of course, there are certain taxes that your limited-liability company may have to file in Nevada. When we talk of federal income tax, an LLC is treated as a pass-through entity. Does it mean such entities are not required to file Nevada business income tax? Yes, it does and for that we need to identify what a pass-through entity really is for tax purposes.

A pass-through entity is basically a type of business structure where the primary goal is to reduce or remove double taxation. A pass-through entity will not be required to file Nevada LLC tax at the corporate level and instead the tax will have to be filed by an individual or owners of an LLC. Thus, the income generated by a limited liability company will be taxed at an individual tax rate.

Here’s an example to help you understand how it works: A Nevada LLC named “DEF” will be a pass-through entity. When this business has to file a tax return then the Nevada LLC tax rate will be as follows:

Revenues – $2,000,000

Expenses – $1,000,000

Earnings Before Interest & Taxes (EBIT) – $500,000

Interest Paid – $200,000

Earnings Before Taxes (EBT) – $300,000

Taxes – $0

Net Income Available to Owners – $300,000

DEF has two owners named Martha and Josh and each of their ownership in the LLC is 50 percent. The LLC will send an IRS Schedule K-1 to both Martha and Josh and this schedule will reports their portion of the pass-through income. So, Martha and Josh will file a file Nevada LLC tax return with $150,000 as their incomes.

General Information about the Nevada LLC Taxes

Although a limited-liability company is a pass-through tax entity there are other unique aspects of Nevada business income tax as well. LLC is a type of business entity that enjoys the flexibility to choose the tax treatment it wants. It can choose to be taxed as any one of the following:

  • A Nevada LLC can elect to be taxed as an S Corporation. It will require Form 8832 and Form 2553 for the same.
  • It can choose to be taxed as a C Corporation as well using Form 8832.
  • Nevada LLC tax rate can also be defined by it choosing to be taxed as a Sole-Proprietorship and this is possible only for a single member LLC or a disregarded entity.

If a Nevada LLC chooses any of the above tax designations then it will not be able to change the tax treatment for a period of five years. There are finer aspects of Nevada LLC tax that business entities planning to register in the state need to be aware of. Some of them include:

  • If an LLC operates its business in Nevada then it will not be subject to any corporate or individual income tax but if it operates outside the state then it will be subjected to a tax treatment specific to the state it is operating in. Example: If you form an LLC in Nevada and operate your business in Nevada and New York then your business will have to file taxes in New York.
  • Nevada LLC tax has to be filed annually and this can only be filed after you register your business entity with the Secretary of State (SOS)
  • The Nevada LLC tax rate and amount to be filed will depend on the level of business activity and earnings.
  • It is also important to know that if your Nevada LLC has employees and reports gross wages to the Nevada Employment Security Division (ESD) then your limited-liability company will be subjected to modified business tax (MBT). The MBT is a type of Nevada business income tax and came into effect on July 1, 2015 through Senate Bill No. 483. MBT has to be paid to the Department of Taxation.
  • Apart from the modified business tax, Nevada now imposes Commerce Tax on gross revenue pursuant to Nevada Administrative Code, NAC 363C. This tax has to be paid to the Nevada Department of Taxation.
  • If you are a domestic business entity in Nevada but are pursuing business activity in another state then you will be treated as a foreign entity in that state and may be required to file franchise taxes. However, your LLC will not be required to pay any Nevada LLC tax like inventory or franchise taxes in the state.

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Federal Taxes for your Nevada LLC

A limited liability company (LLC) in Nevada with a default tax election means such an LLC is not considered as a tax paying entity but as a tax reporting entity by the IRS. The federal Nevada LLC tax by the Internal Revenue Service can be defined according to the number of LLC Members.

If you form a single-member limited liability company that has not been elected for treatment as a corporation, then such an LLC will be known as a “disregarded entity” for Nevada LLC tax purposes. The activities of such an LLC will be reflected on the owner’s federal tax return.

The Nevada business income tax will depend on the owner of the LLC. The activities of such LLC’s will be reflected according to the owner as:

  • If it is a single owner LLC where the owner is an individual then the Nevada LLC tax rate would be like that of a Sole Proprietorship. The individual would have to file Form 1040 Schedule C, Form 1040 Schedule E, or Form 1040 Schedule F.
  • If the owner of an LLC is another business entity like a corporation or a partnership then he Nevada LLC needs to be reflected on the federal tax return of the owner as a division of business entity (corporation or partnership).

It is important to note that a single member LLC or disregarded entity will be required to use the owner’s social security number (SSN) or employer identification number (EIN) for all federal income tax or Nevada LLC tax purposes.

Nevada State Business License for LLC

The Nevada state business license is an important aspect of Nevada LLC tax as without this license, an LLC will not become operational in the state. The business license is an annual requirement and you can apply for it along with the Articles of Organization. The business license has to be renewed each year when filing LLC annual list.

Nevada State Business Income Tax

Nevada has one of the most competitive business tax climates because there are no corporate income taxes, margin tax, or gross receipts tax. Hence, the state avoids heavy tax burdens that impair business activities and growth. The Nevada business income tax that an LLC has to file is known as the Modified Business Tax (MBT). The primary advantage of the MBT is ease of compliance and simplicity.

The Nevada Modified Business Tax (MBT) is basically a payroll tax that is levied on a limited-liability company irrespective of the number of owners. This Nevada business income tax is levied on those entities that are required to pay the unemployment insurance tax. It is collected on a quarterly basis.

This is a unique tax that exists only in Nevada and MBT has two classifications – general business and financial institutions. The Nevada LLC tax rate for general businesses is 1.475% and 2% for financial institutions on the sum of all wages taxable after deducting the cost of employee health insurance. However, the first $50,000 of gross wages of a Nevada LLC will not be taxable.

It is important to note that even if the wages are less than $50,000 and there is $0 tax due, the tax return has to be filed by the limited liability company. The Modified Nevada business income tax is paid to the Department of Taxation by the last day of the quarter.

Nevada Commerce Tax Return

On June 5, 2015, the Nevada Governor introduced the new “Commerce Tax” effective July 1, 2015 after the approval of Assembly Bill 380 and Senate Bill 483. This Nevada LLC tax also known as commerce tax will be levied on any business entity that has gross revenue of more than $4 million.

A “business entity” for this type of Nevada business income tax includes a partnership, corporation, limited liability company, sole proprietorship, and any other business entity engaged in business activity in the state. However, at the same time a limited-liability company will be excluded from the commerce tax if it derives at least 90% of their federal gross income from specific investment activities. An LLC will also be excluded from commerce tax if it is confined to business activities like owning, maintenance as well as management of intangible investments, including patents, bonds, trademarks, stocks, and trade names.

The Nevada LLC tax rate for commerce tax is based on the North American Industry Classification System (NAICS) and hence varies from 0.051% to 0.331%. Let’s look at an example:

The NAICS code for Agriculture, Fishing, Forestry, and Hunting is 11 and the Nevada LLC tax rate is 0.063%. If the business activity of an LLC focuses on Administrative and Support Services, whose NAICS code is 561 then the Nevada commerce tax rate would be 0.154%. At the same time, it is important to keep in mind that if a Nevada limited liability company is engaged in a business in more than one industry category then the tax rate would be determined by the industry category in which the gross revenue generated is higher.

Local Taxes for your LLC

Nevada has one of the most unique tax systems in the nation. Modified Business Tax exists only in Nevada and apart from commerce tax; there are some local Nevada LLC tax that may be levied on businesses operating from this state. The different types of local taxes depending on your business activity include:

  • Sales and Use Tax
  • Live Entertainment Tax
  • Local School Support Tax
  • Basic City-County Relief Tax
  • Mines Tax
  • Liquor & Tobacco Excise Tax
  • Insurance Tax
  • Gaming Tax
  • Property Tax
  • Transportation Tax
  • Business License Tax

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Foreign LLC to Register in Nevada

Date: | Category: | Author: Martin Pouzar

FOREIGN LLC TO REGISTER IN NEVADA

If you have a limited liability company in New York or any other state except Nevada but are interested in forming a business in Nevada then is it possible? Yes, it is definitely possible and all you have to do is register your existing business as a foreign LLC Nevada. This guide is intended at providing you with in-depth information about setting up and operational requirements of a foreign limited-liability company in Nevada.

What is Foreign LLC in Nevada?

A foreign LLC Nevada is a type of business entity whose primary location of business activity is outside Nevada.

For example: if you have registered a limited-liability company in New York and are planning to sell your services or products in Nevada then you will be required to register your business entity as a Foreign LLC in this state. So basically, your entity is a domestic LLC in New York but in any other state it will be considered as a foreign entity.

There are certain parameters that define if your business is a foreign LLC Nevada or not. The parameters include:

  • Selling any product or service
  • Having a bank account in Nevada
  • Having a mailing address in this state
  • Owning a warehouse or distribution facility
  • Owning a store
  • A Sales representative in the state

One of the important aspects to consider is that you can start business activity in the state after approved Nevada LLC foreign qualification.

Steps to register foreign LLC qualification in Nevada

The qualification and formation of a foreign LLC Nevada is governed by Chapter 86 of the 2017 Nevada Revised Statutes, NV Rev Stat § 86.543 – § 86.5463 (2017). There are several aspects of a foreign business entity that you will need to consider so that you are able to form your business properly. Let’s look at the process through a step-by-step guide.

1. Choose a Name for Foreign LLC

The first and foremost step towards Nevada LLC foreign qualification is choosing a business name. A foreign limited-liability company has to register their chosen name with the Secretary of State pursuant to NV Rev Stat § 86.546 (2017). When choosing a name, it is important to consider the following:

  • The name of your foreign LLC Nevada should contain words like Limited Liability Company, Limited-Liability Company, Limited Company, or Limited or abbreviations like L.L.C., Ltd., LLC, L.C., or LC. The word Company can also be abbreviated as Co. This name requirement is governed by NV Rev Stat § 86.171 (2013).
  • The name proposed of your foreign LLC Nevada should be distinguishable from any other name existing on the records of the Secretary of State.

You can reserve the name for a period of 90 days with the Secretary of the state. You can run a name availability search to check if your chosen name is available.

2. Application for Registration

The next step is to file an “Application for Registration of Foreign LLC Nevada” with the office of the secretary of state. This application will ensure, your foreign LLC is formed in the state and your business name is registered. According to NV Rev Stat § 86.544 (2017), the application for registration has to be signed by a manager or a member of the LLC. If the powers are not vested in a member or manager then it has to be signed by any person authorized to sign on behalf of your limited-liability company like a registered agent.

It is important to ensure that the application for registration contains specific information like:

  • The name of the foreign LLC Nevada
  • The jurisdiction and date of its formation
  • A declaration of its existence or certificate of good standing from the jurisdiction where the foreign limited-liability company was formed
  • Name and address of the registered agent of your LLC pursuant to NRS 77.310
  • Address of the business entities office as required to be maintained in Nevada
  • The name and business address of each member or manager

Once the application has been duly filled, it can be submitted by hand or mail with the Secretary of State, 202 North Carson Street, Carson City, Nevada 89701-4201. You can even opt for expedited service, although the fee would be higher. Alternatively, IncParadise can file it on your behalf.

3. Initial List

Once the Nevada LLC foreign qualification is complete, the business entity will be required to file a list of managers and members and this is known as the initial list. The initial list has to be filed within 30 days of filing application for registration. You can also file it along with the application for registration.

The initial list has to be filed under the provisions of NV Rev Stat § 86.5461 to 86.5468 (2017) and should contain the name and address of residence or business of each of the managers or members of the foreign LLC Nevada.

4. Appoint a Registered Agent

A foreign limited-liability company in the state of Nevada should designate and maintain a registered agent pursuant to NRS 77.390 and NV Rev Stat § 86.231 (2017). The primary reason for maintaining a registered agent is to ensure “service of process”. A registered agent is an important aspect of Nevada LLC foreign qualification and can also provide the LLC with an approved physical address where mails and notifications from the Secretary of State can be received.

Note: If a foreign LLC Nevada fails to maintain a registered agent then the Secretary of State can revoke their business or it can lead to dissolution of the legal status of the said business.

A foreign LLC Nevada will have the option to change their existing agent or hire the services of some of the reputable registered agents like IncParadise. You will be required to file the “Registered Agent Acceptance” form along with the application for registration of foreign LLC.

5. Annual Report and Taxes

One of the important annual requirements post Nevada LLC foreign qualification is the filing of an Annual List or Annual Report with the Secretary of State along with a fee of $150. The filing of the annual list is governed by NV Rev Stat § 86.5461 (2017). The annual list has to be filed on or before the last day of the anniversary month after the filing of the application for registration of a foreign limited-liability company. For example: If you have filed an application for registration on Nov 1,2019 then your annual list or report will be due in November 2020 and you will have to file it prior to Nov 30, 2020.

If a foreign limited liability company fails to file an annual report by the due date then there will be a penalty. If the foreign LLC fails to file 90 days after the due date then the Secretary of State will deem the foreign LLC to be in default pursuant to Nevada Revised Statutes § 116.31155 or 116B.620. This can lead to the business entity losing its Nevada LLC foreign qualification.

In addition to the annual report, a foreign LLC Nevada will be required to pay an annual Business Privilege Tax of $200 as well as file individual income tax returns since it is a pass-through entity.

How IncParadise help you

IncParadise is one of the most reputable registered agents in the state and has represented more than 10,000 business entities across the nation. We are in compliance with all commercial agent requirements in Nevada as well as Chapter 77 of the Nevada Model Registered Agents Act. We are authorized to receive service of process, demand, or notice as permitted or required by law to be served on your foreign LLC Nevada. We can provide assistance with the following:

  • Provide guidance and information on how to meet Nevada LLC foreign qualification requirements
  • Help with all types of filing requirements including application for registration of foreign LLC
  • Prepare and file taxes, initial and annual list on your behalf
  • Help you to obtain a business license and Tax EIN
  • Help you to obtain a certificate of good standing
  • Provide top of the line customer service for all queries related to forming a foreign LLC Nevada
  • Provide multiple additional services at an extra fee

EASY SET UP OF NEW NEVADA LLC WITH INCPARADISE

Nevada LLC – Business License

Date: | Category: | Author: Martin Pouzar

NEVADA LLC – BUSINESS LICENSE

An integral part of the process of forming a Limited Liability Company is applying for a Nevada business license. A new business whether it is into manufacturing, services, retail, or scientific innovation, the businesses can become operational only if they have the required permit or license.

Introduction – Business License for Nevada LLC

Nevada is one of the top states when it comes to providing a pro-business environment to start-ups. The state and local government have committed themselves to ensure Nevada businesses enjoy a low-regulation environment and this includes low cost start-up, and streamlined Nevada LLC business license process.

A business license is a document that confirms that a business can operate in a specific jurisdiction in Nevada or anywhere within the state. The license is a type of permission issued to a business depending on the type of business or industry. The licensing process is different for different states and there are specific organizations that do not require a Nevada business license. They are:

  • Government entities
  • Non-profit religious entities
  • Charitable organizations
  • Fraternal organizations

Apart from organizations as mentioned above, certain manufacturers will not be required to obtain a Nevada business license pursuant to NV Rev Stat § 76.103 (2017).

Do I need business licenses and permits for my Nevada LLC?

If your business doesn’t belong to any of the above category, will it require a business license? Yes. In Nevada, all Title 7 entities need to obtain a business license. A title 7 entity is any business entity that has been organized under the Nevada Revised Statutes and has filed formation or incorporation documents with the Secretary of State. Title 7 entities include domestic and foreign limited liability companies (LLC), limited partnerships (LP), corporations, limited liability partnerships (LLP), limited liability limited partnerships (LLLP) and business trusts. Nevada business license is governed by Chapter 76 of the 2015 Nevada Revised Statutes.

It is important to also understand that the business license or permit required is dependent on the type of business. The location of your LLC will also play an important role in defining the licensing needs.

Since a Nevada LLC business license is mandatory for most businesses, failure to comply with the licensing or permit requirements can lead to a penalty of $100 and payment of additional fees pursuant to NV Rev Stat § 76.110 (2017). Such an LLC can even be subjected to operational restrictions. The penalties for operating without a business license can vary from $1,000 to $10,000.

Types of Business License in Nevada

Most businesses registering in the state of Nevada will require a license or a permit. The Nevada LLC business license can be defined under the following categories:

State Business License (SBL)

This is a mandatory license for most start-ups and is issued by the Nevada Secretary of State (SOS). It has to be renewed annually. The Secretary of State has set certain requirements for state business license and it is governed by NRS 76.100. It states that if a business entity is required to file an initial list or annual list with the Secretary of State then it must obtain a state business license during the time of filing the list.

Federal License

There are only specific businesses that may require a Federal License or permit. The requirement of this type of Nevada LLC business license is dependent on the type of activity a business in involved in and accordingly contacts the agency responsible for issuance of such a license. Some of the business activities and their corresponding issuance agencies include:

  • Drug Manufacturing: This license is issued by the Food and Drug Administration (FDA)
  • Ground transportation: This license is issued by the Department of Transportation (DOT)
  • Investment Advising: This federal license is issued by the Securities and Exchange Commission (SEC)
  • Preparation of meat products: This federal license is issued by the Food and Drug Administration (FDA)
  • Selling alcohol, tobacco or firearms: This Nevada LLC business license is issued by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (AFT)
  • Broadcasting: This license is issued by the Federal Communications Commission (FCC)

Retail sales permit

The permit is issued by the State Department of Taxation. You will need to check with the taxation department to identify if your business requires this permit.

Local license

If you are forming a small business LLC in Nevada then you may require just a local license, which will enable your start-up to operate within the county or city where it is situated. Such licenses are issued by the county clerk office or city administration.

Note: If you are planning to operate in multiple cities or counties then you will be required to apply for a local Nevada business license in each of the counties or cities.

Special Permits

This is applicable for small businesses in cities or counties and depending on the type of business, special permits can include those issued by the Fire, Police, Health, or Building Departments.

There are other processes and requirements that need to be met in order to get your Nevada LLC business license. Let’s look at an example:

If you are planning to start a “child care” facility then prior to issuance of the Nevada LLC business license, the concerned authorities (Department of Health and Human Services Nevada Division of Public and Behavioral Health) will conduct an inspection. The inspection is there to ensure you or your facility fulfils necessary business license requirements, safety regulations, insurance and zoning requirements of the city or county it is located in.

IncParadise can guide you through the process of obtaining a Nevada business license!

RESOURCES ON BUSINESS LICENSE

Nevada Business License Application Fee

The Nevada LLC business license fee is subject to the type of license your business entity requires in the state. The fee will be different for federal, state, and city or county licenses.

IncParadise can help you obtain the state business license and the fee is $245, which includes:

  • State business license fee: $200
  • Our license processing fee: $45

We can also provide assistance with information concerning local business licenses and their applicable fees.

If I’m going to start single-member LLC, do I need a business license?

Yes, a Nevada single member LLC (SMLLC) is a business entity that is required by NV Rev Stat § 76.100 (2017) to file an annual list with the Secretary of State and hence will have to obtain a Nevada LLC business license to conduct business in the state. The business license application is included in the Annual List of Members or Managers of a Limited Liability Company.

How IncParadise can help you with Nevada Business License?

There are different types of Nevada business license that is issued on the basis of the activities conducted and the location of a business. Your business may require:

  • A state business license (SBL)
  • A State and Federal License
  • A State and Local County License

It may look like a complicated process especially when it comes to identifying what type of license your company should ideally apply for. This is where our experience and expertise will assist you with ensuring you are able to apply for and obtain the correct Nevada LLC business license.

We help make new business filing
and submissions faster and easier!