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NEVADA LLC OPERATING AGREEMENT

The Nevada LLC operating agreement is a type of legal internal document that is drafted by the owner or members of the Limited Liability Company. It is important to note that this document is not a legal requirement in all states except Nevada, California, Maine, Delaware, Missouri, New York, and Nebraska. If you are planning to form an LLC in Nevada then this document is required pursuant to Chapter 86 – Limited-Liability Companies.

What is Nevada LLC Operating Agreement?

The salient aspect of a Nevada LLC operating agreement is that it clarifies, outlines, and strengthens the organizational structure of the organization. This agreement can only be adopted through unanimous written consent or unanimous vote of the members of the said LLC. The agreement can be in an electronic or tangible format and can be adopted prior to the filing of the articles of organization or even after pursuant to NRS 86.286. It is important to remember that an operating agreement has to be drafted by single member as well as multi-member LLC’s.

What Information does a Nevada LLC Operating Agreement Contain?

What does the Nevada operating agreement consist of? How does it help a Limited Liability Company in Nevada to manage its administrative or business functions? There are several aspects of the operating agreement that will throw an insight into it and the finer aspects are:

  • Specific Information: A Nevada operating agreement normally contains specific information pertaining to the business entity or LLC like:
    • The registered name of the LLC pursuant to NRS 86.176
    • The date of formation in the state
    • Physical address of the business entity
    • The registered agent designated for service of process pursuant to NRS 86.236
    • The term of the Nevada Limited Liability Company
    • The process as well as rule for new members and those leaving the LLC
    • A list of existing managers in the LLC
    • A list of all members of the LLC
  • Terms & Conditions: Once a Nevada LLC operating agreement has been drafted, the terms and conditions has to be agreed upon by the members for it to be legally binding.
  • Defining Structure: Drafting of the operating agreement provides an opportunity for defining the overall structure related to the working or operations of the LLC along with the financial relationship with any of the LLC members.
  • Other Information: The Nevada LLC operating agreement will contain information pertaining to the percentage of ownership of each member of the Limited Liability Company. It will also contain information regarding how the profit and loss is to be distributed, the responsibilities and rights of each LLC member as well as the provision for transfer or change of membership. The operating agreement will also include information related to areas such as list of member capital contributions and distributions.

It is important to note that unless otherwise specified in the Nevada operating agreement, a manager or member, or any other person cannot be held liable for any breach of duty, to other members of the LLC or the said Limited Liability Company in accordance with NRS 86.286.

Benefits of an operating agreement

Why should your LLC have an operating agreement? Are there any benefits?

There are certain benefits of a Nevada LLC operating agreement and these benefits not only protect the LLC but also the members or managers. Some of the primary benefits are listed as under:

  • Member’s Liability: It is a known fact that a Limited Liability Company and its members are unique identities. Even then, there may be situations in which the members of the said LLC may be held accountable or liable for specific actions especially those related to debts and liabilities like business loans. In such a scenario, a creditor can go after the said member’s personal assets. This possible if the creditor can provide evidence to prove that the LLC was solely created for providing legal protection to the member. The best way to avoid such legal complication is by ensuring the LLC has laid out the expectation of each member clearly in the Nevada operating agreement.
  • Resolving a Dispute: There can be a situation where-in disputes can arise between the different members of a Limited Liability Company. This is where an operating agreement can help resolve a dispute or ensure a dispute never takes place in the first instance. A Nevada LLC operating agreement explicitly cites the expectations of the members and lays emphasis on the rules and regulations to be followed by each member.
  • Non-competes: One of benefits of drafting an operating agreement is that an LLC can be protected if a non-compete clause is inserted in the agreement. This will prevent members of the said Limited Liability Company from competing with the company. The non-compete has to be properly defined to be effective or enforceable.
  • Dissociation and Withdrawal: A Nevada operating agreement when properly drafted can help in defining roles of each member of the LLC and can also resolve issues related to the dissociation or withdrawal of any member whose interests are not aligned with that of the business. You will not have to power to force out a member if reasons for such actions are not mentioned clearly in the agreement. Although, there are state laws on dissociation and withdrawal, it always pays to draft an agreement with these clauses.

Whether it is a single-member LLC or multiple members LLC, the benefits of operating agreement can help the business to follow its goals and priorities instead of precious time getting wasted in liability suits and internal disputes.

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