One of the most important decisions you will ever make for your business is whether or not to incorporate. If you are thinking about incorporating your business as a limited-liability corporation (LLC), there are a few things you should know before making a commitment. LLCs are increasingly popular options for business owners and offer a wide range of benefits, but they also have a registration process and tax requirements which differ from traditional corporations. Nevada is one of the most popular states to register LLCs, but it has its own set of regulations you’ll have to learn if you want to incorporate within it.
What is an LLC?
A limited liability corporation (LLC) is a hybrid business structure that combines elements of sole proprietorships, partnerships, and corporations. They offer limited liability protection along with pass-through taxation, which means profits and losses can be recorded on personal tax returns. They also allow more flexibility to share profits than traditional S- or C-corporations. In addition, they do not have a residency requirement, meaning noncitizens can create one. LLCs also require less paperwork and administration to maintain thanks to their relaxed governance rules.
Due to these advantages, LLCs have become increasingly popular among business owners since their introduction in 1977. One drawback of an LLC is that each state has different rules for incorporation for them, meaning taxes, fees, and other regulations can vary greatly. You will have to register your business as an LLC in every state you hope to do business. However, Nevada has an easy, inexpensive registration process and allows business owners to quickly incorporate their enterprise as an LLC, making it a popular state for business owners to base their companies.
The Benefits of a Nevada LLC
Nevada LLCs are attractive to business owners and investors for several reasons. For one, Nevada allows single-member LLCs, which means a single person to occupy all positions within the company as if it were a sole proprietorship. Nevada also places a strong emphasis on protecting the privacy of business owners. It does not have an IRS Information Sharing Agreement, and business owners do not have to disclose their identity during public filings for incorporation. Nevada’s low-tax environment has also proven attractive to business owners, who can avoid paying a personal or business income tax, a state corporation tax, a capital gains tax, or franchise fees. If you need to incorporate fast, Nevada allows you to do so in as little as an hour for a $1,000 filing fee.
How Is an LLC Setup in Nevada?
Follow the steps below on the path to setting up an LLC in Nevada:
1. Choose a Name
The first step you’ll have to take when forming an LLC in Nevada is choosing a name for your business. It must include “Limited Liability Corporation” or the abbreviation “LLC” in some form, and it must be different from names currently in use within the state. Certain words, such as “bank” or “hospital,” require you to hire relevant professionals and file more paperwork before using them.
2. File Articles of Organization
Once you’ve chosen a name for your company, you’ll have to file Articles of Organization with the Secretary of State, either in-person or online. This is when you will decide on the management responsibilities of your LLC. You’ll also have to provide a statement of information, which includes the names and addresses of all managers and how long you want the LLC to last.
3. Select Your Registered Agent
Next, you’ll need to select someone to serve as an agent of service of process, or a Registered Agent. This person will handle any legal papers your LLC sends or receives in the event it is sued. The Registered Agent must have a physical address within the state and can be either a person or a business authorized to operate in the state of Nevada.
Nevada does not require LLCs to have an operating agreement, but it is a good idea to write one if ownership is split between several people. An operating agreement outlines responsibilities for owners and managers, which can help to pre-empt disputes among owners.
4. Obtain Your EIN
Finally, you’ll have to obtain an Employer Identification Number (EIN) from the IRS, which is needed to file taxes.
The Cost to Form a Nevada LLC
You’ll have to pay a few nominal fees in order to incorporate an LLC in Nevada. You can reserve the name of your business for up to 90 days for a $25 fee. There is also a $75 processing fee for the Articles of Organization. You must also submit an Initial List of Managers and Members along with a $150 fee. Finally, you must also obtain a business license, which includes a $200 fee. Normally, it takes about two to three weeks for the state to recognize your business, but you can expedite this process by paying either a $125, $500, or $1,000 fee to reduce the wait time to 24 hours, two hours, or one hour, respectively.
Steps to Take After Starting an LLC
After you start an LLC in Nevada, be sure to do each of the following:
Separate Your Assets
Your LLC should have its own bank accounts and assets. You must disentangle your own finances from those of your LLC. Part of this includes setting up an accounting system for your business to keep track of expenses, including tax obligations.
Register for Taxes
Nevada has few business taxes, but you will still need to register your LLC for the Nevada Modified Business Tax and the Nevada Unemployment Insurance Tax. Further taxes you business may qualify for include the Nevada Sales Tax and the Nevada gaming tax, among others.
Obtain Necessary Permits
Depending on your business, you may have to obtain a number of permits from federal, state, or local authorities.
Check to see if any insurance coverage is mandated for your industry. If you plan on hiring employees, you will at a minimum need to obtain Workers Compensation Insurance.
Comply with Hiring Regulations
Make sure your LLC is in compliance with hiring regulations if you plan on hiring workers.
Maintaining LLC Status
In order to maintain LLC status in Nevada, you’ll have to renew your state business license along with a $200 fee. You must also pay a $150 fee and submit an updated list of your LLC’s managers. The late fees for these are $100 and $75, respectively. Your LLC can be suspended and dissolved if you fail to pay annual fees or if your business does not have a registered agent.
Obtaining a Certificate of Good Standing
If your LLC is authorized to do business in the state of Nevada, you’ll obtain a “Certificate of Good Standing.” Also known as a “Certificate of Existence” or “Certificate of Authorization,” this document simply shows that your business is current on all obligations to the state and is authorized to do business in Nevada. Lenders and other businesses may require one before doing business with your company, so it’s important to have one on-hand.
To obtain a Certificate of Good Standing, simply contact the Nevada Secretary of State’s office by phone, email, fax, mail, online or in-person and fill out the necessary forms. You will be charged a $50 fee and it can take fifteen days to process your order. You can expedite this process by paying an additional $75 fee. However, if you request your form online, you can obtain it immediately.
Nevada LLC Tax Requirements
Your LLC’s tax obligations will depend on whether it is viewed by the state as an S- or C-corporation, a limited liability partnership, or a sole proprietorship. You will have to fill out different forms with the IRS depending on how your LLC is categorized for tax-purposes. While Nevada does not have a corporate or personal income tax, it has a number of taxes which still affect businesses. The modified business tax (MBT) is a quarterly payroll tax which affects businesses that hire workers. Your LLC will be automatically enrolled in this once it reports any gross wages it pays out to the Employment Security Division, which is mandatory for businesses with employees.
As of July 1, 2015, Nevada’s MBT is 1.475% of taxable wages over $50,000, less health care deductions, per calendar quarter. Nevada also enforces a gaming tax which affects businesses involved in gambling. The tax consists of a 6.75% tax on gross gaming revenues and a1% tax in the form of fees, for an effective tax rate of 7.75%.