Any new business owner will attest to the relative complexity of setting up a Series LLC entity in Nevada, especially if you are unfamiliar with certain legal steps required by the state. So if a Series LLC is something you are potentially interested in but are undecided whether it’s worth the trouble, this set of guidelines may help you get an idea of how to get started on the whole process.
Originally established in the state of Wyoming in the late 70s, the limited liability company—or the LLC for short—is a fairly new business model that has been on the steady rise in popularity throughout the country.
The Series LLC is a step further from the basic model. It was first introduced in Delaware and is currently available only in a number of states, Nevada included, but this business model is quickly expanding to other parts of the country.
As the name suggests, a Series LLC is an LLC consisting of more than one division or, as it reflected in the name, more than one series. Every division in this Series may have different goals from those of their parent company (and more often there is also an asset and liability diversity between the divisions), allowing a certain degree of security and legal independence provided the series is formed correctly.
There are a few major factors at play when it comes to the process of forming a Series LLC, and if you’re interested in taking your company a step further, we recommend you get more closely acquainted with the legal technicalities of this process.
IMPORTANT NOTE: When it comes to the murky waters of business law, it’s vital to understand that even with the best resources about the formation of this type of entity, it is not a guarantee of a smooth process if you are not someone overly familiar with this aspect of the state law. It’s recommended you seek legal advice to assist you in forming a Series LLC in Nevada.
Still, those who seek the stable growth of their business in a way that protects their assets, forming a Series of LLCs is an ideal course of action. A good LLC service can do this for you in a swift and secure fashion, or you can form it yourself using your own resources.
What does Series LLC Mean?
- What does Series LLC Mean?
- How do you Create a Series LLC in Nevada?
- Finding a Good Name for a Series LLC
- Choosing a Registered Agent
- Compiling the Articles of Organization
- Submitting the Initial List and State Business License Application
- Applying for an EIN
- Submitting an Operating Agreement
- Establishing a Financial Support Network
- Securing Licenses
- Following Maintenance Protocols
- Is it Possible to Outsource a Series LLC Creation?
- Final Thoughts
As established earlier, a Series LLC is a group of divisions formed by a single parent company. Despite each division operating under the same parent LLC, the nature of this model is to give each division owner more independence, financial autonomy and legal security. This primarily ensures the parent company and other LLC divisions are less likely to face a lawsuit specifically targeted at a single division in the series.
If you’re closely familiar with the regular LLC business model, you’ll probably find it more than convenient that Series LLC comes with the same limited liability insurances aimed to shield a regular company’s assets when met with legal action. This means that an owner’s individual assets, as well as interests of other sub-divisions, won’t come under fire when a lawsuit is brought against an unconnected LLC division in the Series.
This structure is what makes Series LLC so appealing to certain business owners since it eliminates legal dependency between all LLCs working under the same parent company while at the same time creates a network of operations under a single parent company without the hassle of setting up multiple independent LLCs.
How do you Create a Series LLC in Nevada?
Finding a Good Name for a Series LLC
It’s generally a good idea to come up with a name that is reflective of the type of business your company works with, or at least a name that is hard to miss. Additionally, a Series LLC should incorporate the business model in the actual name, whether it’s LLC, L.L.C. or Limited Liability Company.
Another important factor in naming your serial business is checking name availability. There are many ways to optimize the process, such as the business name search tool designed to cross-check names that have already been taken by other Nevada entities.
It’s important to remember that corporate designations are also off-limits. This includes definitive business descriptors too as they should be kept out of an LLC name if they don’t reflect the type of business the company specializes in, i.e. including “bank” in the name of a series LLC that has nothing to do with banking.
If there is something more you’d like to know about the subject, be sure to look through a more detailed guide on naming an LLC that details the process of naming standard LLCs and Series LLCs.
Choosing a Registered Agent
The next logical step here is finding a reliable registered agent. This may require a bit of careful consideration on your part.
Of course, you are free to pick any registered agent that seems most appealing to you, but above all, it must be eligible to provide services in Nevada from a local office that guarantees quick communication with regional officials.
This is done to arrange a timely exchange of documents between the office and the state, meaning the registered agent of your choice can securely process vital paperwork in the required time-frame which is essential for handling lawsuits and regular payments.
What’s convenient about Series LLC is the fact that there is no legal obligation to assign unique registered agents to every LLC division—it’s completely acceptable to work only with one agent regardless of the side of the Series.
Compiling the Articles of Organization
Certain states require you to fill and submit separate documents to establish a regular LLC and a Series LLC. In that respect, Nevada saves you some trouble since the state allows you to submit the same form of the Articles of Organization for creating both entity types.
Where this document strays from the single template is in the details you will be filling in Section 1 of the form when dealing with a Series LLC. It’s important to do it correctly since this part determines whether your parent company will be permitted to form other LLC divisions under its name.
The form states all pertinent information regarding your business, from the company address to the legal info on your registered agent and the address of their Nevada office. Other information should cover the management assigned to the company (if not managed by owners), its LLC organizer with name and signature, names and addresses of the ownership group relating to every created entity, plus the course of action for future restructuring or dissolution.
When all paperwork is filled out according to legal requirements, the form should be directed to the Nevada Secretary of State’s office with the mandatory $75 fee.
Submitting the Initial List and State Business License Application
The full name of this document, the Initial List of Managers or Managing Members and State Business License Application, should speak for itself but what it essentially does is reinforces the information you have already provided in the Articles of Organization, namely the initial list of the company’s owners or assigned management.
It may seem superfluous but such is the legal process for the serial LLC formation in Nevada, and it will only strengthen your case. What makes it a bit more convenient is the possibility to apply for the Nevada business licence on the same form to save you the time.
Both applications come with a mandatory fee: $150 for the initial list form and $200 for the business license.
Applying for an EIN
LLC divisions should be prescribed its own EIN, or Employer Identification Number, which is an ID number issued by the Internal Revenue Service for taxation purposes.
Much like your personal SSN, the EIN functions as a nine-digit identification number tied to all financial operations of a specific company. It appears on the tax forms, financial documents, issuing payments, whether one-time or in payroll form.
To obtain an EIN, you must download a free form from the official IRS portal, fill it out, and submit, after which the company in question will be given its own EIN identification code.
Submitting an Operating Agreement
As mentioned previously, Nevada does not obligate you to file separate organization forms for every LLC division in a given Series, and the same goes for operating agreements—the existence and operational goals of every division can be noted in the operating agreement for the parent LLC.
Normally, this type of document is applied internally with the main goal to elaborate on the functions of the parent company and its divisions i.e. information on all divisions, the roles of each owner, detail the owners’ voting rights, their financial contribution and allocation plans, the hierarchy of each company or the possible assignment of a manager, plans for internal restructuring or entity dissolution etc.
The status of this form is a bit unclear when it comes to Nevada legislations. There are no regulations on the state level that demand the drafting of the operating agreement at all, let alone submitting one with the state as a step to legitimizing a series LLC.
So it’s legally possible to establish LLC divisions without filing any paperwork with the state but rather by simply indicating their formation in the operating agreement where the direction of each division is detailed for interior use.
On top of that, all regular LLCs, as well as divisions in a Series, can legally operate only when in possession of the certificate of good standing. This document is issued by state authorities but it is unclear how such a process is possible without the state receiving proof of an entity’s existence first.
Establishing a Financial Support Network
Any business entity should be tied to its own bank account instead of a personal one that the owner might be in possession of which is the case for all LLC types and any other forms of business.
The entire process is a little bit lengthier with Series LLCs given that LLCs divisions require exclusive bank accounts, all different from that of the establishing company.
Such an approach is imperative for sustaining the insulated structure of the serial ownership, allowing every division to enjoy financial independence and operate at its full potential as a division in the Series which would be impossible if an LLC division depended financially on the bank account of the parent LLC.
A qualified accountant is likely to perform all financial operations to a much better degree, so it would make sense to arrange a finance professional for all divisions. It would also help to invest in accounting software to optimize the processing of financial transactions.
Nevada is famously more lenient in terms of licensing than other states that support the Series LLC format. The general license applied to all Nevada businesses is obtained from the Nevada Secretary of State but it doesn’t mean this certification is indefinite: every entity is tasked with renewing it each year.
It’s possible your parent company and its LLC divisions may require additional licensing on a local level (county and municipality) which typically depends on the industry the business operates in.
But given the relative ease of operation in the state, it’s far more likely you won’t need additional permits. Still, it’s always best to check whether your business qualifies for professional licensing.
Following Maintenance Protocols
The smooth sailing of any business, particularly a multi-division one, requires careful maintenance, in the case of Nevada—submitting the Annual List of Managers or Managing Members and State Business License instead of the more familiar annual or biennial reports seen in other states.
Not unlike the initial list submitted during the early stages of formation, this document (identical to the initial list form) is designed to inform the state of any changes that may have occurred in the ownership/managerial group in the elapsed time.
This form should be submitted together with the mandatory $150 fee, but it’s also a good idea to send it together with the re-application for the state business licence and its $200 renewal fee.
Is it Possible to Outsource a Series LLC Creation?
Nevada permits two courses of action in this regard: you can rely on your own abilities to save significant sums of money (and potentially miss errors in paperwork or legal processes) or go for the other option where you hire an attorney to aid you.
While certain states concede the outsourcing of these proceedings to service providers like Northwest Registered Agent, the option is, unfortunately, not possible in Nevada.
It’s recommended to employ a lawyer specializing in commercial and corporate law to help you navigate the rather complicated legal matters.
Creating a Series LLC in Nevada is fairly similar to the same process with a standard LLC. The key is to know the correct ways to fill out the documentation, namely the Articles of Organization where you indicate the nature of the entity. Additionally, it won’t hurt to expand on the roles of every created LLC division in the operating agreement.
And if you’d rather save yourself the turmoil of navigating the complex organizational conventions and avoid mountains of paperwork, it would serve your interests well to seek services from an attorney who can supervise each step of forming a Series LLC in Nevada for you.