Are you about starting a business in Nevada and want to form an LLC? If YES, here is the legal requirement to start an LLC in Nevada and how much it cost. This article will help you understand how to form an L.L.C. in Nevada. We will show you a step-by-step process on how to create an L.L.C. in Nevada and what you need to do after forming your L.L.C.
What is an L.L.C.?
L.L.C. is an abbreviation for Limited Liability Company. Creating an L.L.C. is one of the easiest ways to build a wall between your private assets and your company’s financial liability. It helps protect your personal assets if someone sues your company. An L.L.C. offers you the protection you can’t get as a sole proprietorship or General partnership.
An L.L.C. also has some tax advantages; the business itself is not responsible for taxes on its profit. Instead, the members of L.L.C. report their share of business profit and loss on their personal tax returns just the way taxes are reported for a general partnership; this is called “pass-through taxation.” This means a lower tax rate on company profits along with asset protection and tax flexibility. The L.L.C. business structure has a number of other advantages
- No Residency Required: Owners of an L.L.C. don’t have to be U.S. Citizens or permanent residents.
- Legal Protection: Owners of an L.L.C. are given limited liability for business debts.
- Enhanced Credibility: Partners, suppliers, and lenders may look more favourably on your business when you form an L.L.C.
- Ownership Flexibility: There is no limit on the number of owners an L.L.C. can possess. Additional members can buy equity in the company.
- Less Record Making: With an L.L.C. no annual meeting or minutes books are required.
- Gain Access to Business Loans: When you form an L.L.C., your business will begin to build a credit history. This will aid your business access loans.
An L.L.C. combines the assets protection of a corporation with the simplicity of a partnership, which makes it one of the most popular entity structures for small businesses.
Where is the best place to form an L.L.C.?
People venturing into the business for the first time always ask which is the best State to form an L.L.C. There is a lot of hype about creating an L.L.C. in Florida, Alaska, Montana, and Indiana; however, one of the best but less hyped state is Nevada. But it is best you form an L.L.C. in the state where your business will be based.
A Detailed Guide to Starting an LLC in Nevada and the Cost
Forming an L.L.C. in Nevada is a straightforward process and won’t cost you much money. Below are the steps to follow if you want to form an L.L.C. in Nevada.
A Nevada Limited Liability Company (LLC) is a hybrid business structure that offers personal liability protection in case of a lawsuit. In the event your Nevada LLC is sued, your personal assets, that is your home, vehicles, and bank accounts are kept safe from your creditors.
Interestingly, you can make use your Nevada LLC to run a business or you can use your LLC to purchase assets such as real estate, vehicles, boats, and aircraft.
STEP ONE: Choose a Name for Your LLC
Prior to filing your Nevada LLC’s Articles of Organization with the Secretary of State, it is expected that you search the state’s database to make sure your desired LLC name is available for use. Your LLC name must be unique and distinct when compared to other businesses that are legally registered in the state.
Once you come up with a name, you can search your Nevada LLC name using the Nevada Business Name Search Page: https://www.nvsos.gov/sosentitysearch/corpsearch.aspx
LLC Designator: As per Nevada state law, NRS 86.171, your LLC name must end with a proper designator. The following are allowed:
- Limited Co.
- Limited Company
- Limited Liability Co.
- Limited Liability Company
N.B: If you’re not sure which designator to use, “LLC” is the most common. It’s also the easiest to recognize. Please note that in Nevada, your LLC name cannot include a designator that makes it sounds like a different type of legal entity:
- P.A. or P.C.
- Professional Association or Professional Corporation
- Non Profit Corporation
STEP TWO: Hire a Nevada LLC Registered Agent
The Nevada Secretary of State requires you to list a Registered Agent in your LLC’s Article of Organization. A Nevada Registered Agent is a person or a company designated to receive notices sent to your LLC, as well as any legal mail (called Service of Process) in case your business is involved in a lawsuit.
Your Nevada Registered Agent must have a physical street address located in the state and PO Boxes are not allowed where Service of Process and other documents can be received. People who are Qualified to be Your LLC’s Nevada Registered Agent are;
- Your LLC can be its own Registered Agent.
- List an office or position within your LLC as the Registered Agent.
- A friend or family member to be your LLC’s Registered Agent.
- To hire a Commercial Registered Agent. Hiring a Commercial Registered Agent is a good idea if you want to keep your address off public records or if you don’t have an address in Nevada.
STEP THREE: Nevada Articles of Organization, State Business License, and Initial List
Nevada LLC filing forms and fees: Articles of Organization ($75), State Business License ($200), and Initial List of Managers or Managing Members ($150).
Please note that in order to form a Nevada LLC, you have to submit 3 documents to the Secretary of State. The Articles of Organization, the State Business License, and Initial List of Managers or Managing Members. This is mandatory. The total filing fee for all three forms is $425.
Method of filing: You can form an LLC in Nevada by mail or online; however, it is advisable to file your LLC online since it has a faster approval time and the process is easier.
Filing your Nevada LLC online requires that you create a SilverFlume account: https://www.nvsilverflume.gov/home
Nevada LLC approval: Your Nevada LLC will be approved immediately when you file online, but it can take 5-10 minutes before your documents are available for download in your SilverFlume account.
After the process, you will see 3 documents available for download and the document will be stamped and approved:
- Articles of Organization
- Initial List of Managers or Managing Members
- State Business License
STEP FOUR: Craft Your Nevada LLC Operating Agreement
A Nevada LLC Operating Agreement is a written contract among the partners of the business that clearly states who owns the LLC and how much of the LLC they own. Your Nevada LLC’s Operating Agreement will also document how the LLC is managed, how profits will be shared, and how taxes are to be paid among other related issues.
Please note that an Operating Agreement should be put in place for both Single-Member LLCs and Multi-Member LLCs located in Nevada.
The fact is that having an Operating Agreement for your Nevada LLC helps prove that the company is a separate legal entity from yourself. This helps maintain the personal asset protection provided by your LLC and is very beneficial to have if you ever end up in court.
“Internal Document”: An LLC Operating Agreement is an “internal document”, meaning, you don’t have to send a copy to the Department of Taxation, the IRS, or any other government agency. You just need to keep a copy of the Operating Agreement with your LLC business records and give a copy to the other LLC Members, if applicable.
STEP FIVE: Apply for an EIN for your Nevada LLC
The next step you are expected to take is to apply for an EIN for your Nevada LLC (Don’t apply for an EIN until your Nevada LLC is approved by the Secretary of State). An EIN (Employer Identification Number) is obtained from the IRS after your Nevada LLC is approved by the Secretary of State. An EIN is also called an EIN Number, FEIN, Federal Employer Identification Number, or a Federal Tax ID Number. They all mean the same thing.
You can liken your Nevada LLC’s EIN Number as the company’s “social security number”. It helps identify your LLC to the IRS for tax and filing purposes. Please note that your Nevada LLC’s EIN will also be used when you open an LLC bank account, register your LLC with the Department of Taxation, and process employee payroll (if applicable).
How is a Nevada LLC taxed: The IRS doesn’t have a specific tax classification for LLCs and instead, a Nevada LLC can be taxed 4 different ways with the IRS; 2 of which occur by default (they occur simply by obtaining your LLC’s EIN), and 2 require a special election to be made (a form must be filed after you obtain your LLC’s EIN). We recommend reading how an LLC is taxed before applying for an EIN for your LLC.
Please note that;
- An EIN is free ($0): The IRS will issue an EIN to your LLC at no cost.
- Husband and wife LLC: If you are forming a 2-Member LLC in Nevada you can elect a special type of taxation called a Qualified Joint Venture. This allows a 2-Member LLC (owned by a husband and wife) to be treated as a Sole Proprietorship instead of a Partnership for tax purposes.
- EIN Responsible Party: This will be the IRS’s “contact person” when you apply for your Nevada LLC’s EIN. If you have a Single-Member LLC, you will be the Responsible Party. If you have a Multi-Member LLC, any LLC Member can be the Responsible Party. For more information, please see EIN Responsible Party for LLC.
How to Apply for an EIN
There are 3 ways to apply for an EIN for your Nevada LLC. If you have an SSN or ITIN, you can apply for an EIN online. If you apply for an EIN online and you get an error message, you’ll need to apply,with Form SS-4 instead. If you don’t have an SSN or ITIN, you can still get an EIN for your LLC by following these instructions: how to get an EIN without an SSN or ITIN.
STEP SIX: Nevada LLC Annual Requirements
In Nevada, you would need to complete the following requirements every year in order to keep your Nevada LLC in operations and in good standing:
- Renew your State Business License ($200 per year) and
- File an Annual List of Managers or Managing Members ($150 per year)
Mandatory: Both of these must be filed by all LLCs in Nevada, regardless of income or business activity levels. Failure to meet the annual requirements will result in the Nevada Secretary of State placing your LLC into a “Default” status, and then eventually a “Revoked” status.
Due date: Both the Nevada LLC State Business License and the Annual List are due on or before the last day of your LLC’s anniversary month. The anniversary month is the month your LLC was approved. For example, if your LLC was approved on May 20th 2023, your State Business License renewal & Annual List will be due by May 31st 2024. Then every year going forward it will be due by May 31st.
How to file: You can renew your State Business License and file your Annual List each year inside your SilverFlume account: https://www.nvsilverflume.gov/home
Approvals: On the “Documents” page of your SilverFlume account, you’ll be able to download your new State Business License along with a filed and stamped copy of your LLC’s Annual List.
Step SEVEN: Nevada Municipal and Regulatory Licenses and Permits
Apart from the State Business License mentioned above, your Nevada LLC may also need to apply for municipal (county or city), as well as regulatory licenses and/or permits.
Nature of business and location: These two factors will determine which licenses and permits your Nevada LLC may need to apply for.
Common Business Registration: This tool, located within SilverFlume, will help you determine the licenses and permits your Nevada LLC may need, and which municipality and regulatory agency you may need to contact.
After you complete the Common Business Registration, look towards the bottom of your SilverFlume Dashboard. In the “External Tasks” section, you’ll find the information for the municipalities and agencies you may need to contact. You’ll just need to call them, explain what your Nevada LLC will do, and ask them what licenses and/or permits are required.
STEP EIGHT: Taxes Requirements in the State of Nevada
In Nevada, typically, income taxes are paid on 3 levels:
Please note that unlike most states, Nevada doesn’t have a personal state income tax.
Federal income taxes: By default, a Nevada LLC is a pass-through entity which means the profits and losses of the LLC flow through and will be listed on your personal federal income tax return.
- If you have a Single-Member LLC taxed as a Sole Proprietorship, you’ll likely list your business income on a Schedule C as a part of your personal 1040 return.
- If you have a Multi-Member LLC taxed as a Partnership, you’ll need to file a 1065 Partnership Return, issue K-1s to each of the Nevada LLC Members, and then the LLC Members will include the K-1 income on their personal 1040 return.
- The IRS doesn’t have a specific tax classification for LLCs, therefore, Nevada LLCs are taxed based on the number of Members they have. For more information, please read how LLCs are taxed. Additionally, an LLC can elect to be taxed as an S-Corporation to save money on self-employment taxes.
Qualified Joint Venture: Since Nevada is a community property state, a 2-Member LLC owned by a husband and wife can elect to be taxed as a Sole Proprietorship (instead of a Partnership) by making a Qualified Joint Venture election with the IRS.
- Sales tax: If your Nevada LLC will sell or transfer tangible personal property in the state, you’re required to collect sales tax.
- Sales Tax Permit: If your LLC is required to collect sales tax, then your LLC also needs a Nevada Sales Tax Permit. The cost is $15 per location/storefront.
- Commerce Tax Return: All LLCs doing business in Nevada must file this return every year, however, only those businesses that earn $4 million or more must pay the tax. For everyone else, the return will just be “informational” (no tax will be paid).
- Other taxes and filings: Your Nevada LLC may also be responsible for filing a Modified Business Tax, Unemployment Insurance tax, payroll taxes, and more.
Recommendation: You’ll need to speak with an accountant to determine all your Nevada LLC’s tax reporting and filing requirements. Figuring out all of your tax filing requirements can be very complicated and if filed improperly, it can lead to penalties, fines, and interest. We recommend working with an accountant to make sure you meet your federal, state, and local tax obligations.
STEP NINE: Open a Nevada LLC Bank Account
Once the IRS has issued an EIN Number to your Nevada LLC, you can open a business checking account. It’s best practice to have a business checking account for your Nevada LLC in order to maintain your personal liability protection.
Using a personal bank account for your LLC is called “commingling of assets” and this can lead to personal liability issues if you end up in court.
Please note that having a separate business bank account for your Nevada LLC also makes record-keeping easier for accounting and tax purposes. Since banks in Nevada have their own rules and regulations, it is recommend calling a few places to determine the following:
- minimum initial deposit
- minimum balance requirements
- monthly maintenance fees (if any)
Required Nevada LLC paperwork: In order to open a business bank account for your Nevada LLC, you’ll need to have the following:
- Articles of Organization (stamped and approved)
- State Business License
- Initial List of LLC Managers or Managing Members
- EIN Confirmation Letter from the IRS
- Photo ID (driver’s license and/or passport)
- Operating Agreement (it may not be needed, but it’s a good to bring anyway)
N.B: Call the bank ahead of time and double-check what documents are required.
- LLC Members: If you have a Multi-Member Nevada LLC, all Members that want to be on the bank account should be present when opening the account.
- Debit card and credit cards: Most banks will provide a business debit card on the spot after the account is opened. If not, they’ll usually mail the debit card in 1 to 2 weeks.
- Non-U.S. residents: If you are a non-US resident that has formed an LLC in Nevada, you can still open a U.S. business bank account. You can find more information here: opening an LLC bank account for non-US residents.
STEP TEN: Obtain a Nevada Business Phone Number
International best practices require that you obtain a business phone number for your company as against making use of your own private number. You can get a local Nevada telephone number or you can get a “1-800” number for your business.
There are many options to choose from when it comes to official phone number, but just ensure that you choose a telecom company that will better serve your business.
Forming an L.L.C. in Nevada is not a daunting task. Even after forming it, there are still some things you need to put in place before you commence operation. Please, note that the information in this article is provided only for general purpose and it is no way a legal advice. No lawyer – client relationship is established or should any such relationship be assumed. For legal advice, please consult a professional lawyer.