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  • Writer's pictureSarah Morris Ocampo

What Are The Top Three Mistakes People Make When Forming an LLC in Nevada?

What are the top three mistakes people make when forming an LLC in Nevada?

One. Making it member managed. We see this all the time. If you want to hide ownership, which is one of the benefits of having an LLC, then you do not make it member managed because then it literally shows the member, which is the owner when you’re talking about an LLC. So, don’t click the box managing member, because then you’re going to tell the world that you’re the owner.

Two. Naming yourself as a registered agent. This happens all the time as well, especially when we’re getting ready to sue people and sue entities. We look up that entity on the secretary of state website because we have to find out who the registered agent is for the entity and serve them with the complaint. If we look it up and we see that it’s member managed, we know who the owner is, and that member is also their own registered agent, then we believe we will do well in litigation because they are not sophisticated enough or have enough money or capital to have an actual company. As the registered agent, there are registered agent companies in town that do it. There are also attorneys that do it. Of course, I think an attorney is the best route to go because the attorney will be the first line of defense if you are sued, meaning that they will be served with a copy of the complaint. So the other thing that happens is when we’re looking at these registered agents, if it’s an attorney’s office, then a lot of times we’ll give them a call before we actually serve them with the complaint and we can figure out if there’s a way that we can negotiate the filing.

There are many reasons to make sure your registered agent is not yourself. Plus the fact that I will mention, if you are your own registered agent and you live in a gated community, then what can happen is they can try to serve you, if there’s a guard at the gate, they can serve the guard according to Nevada statute, and if they serve the guard, you are now relying on that guard to give you a copy of the complaint. If they fail to give that to you, it’s still proper service and they could get a default judgment against you because you wouldn’t even know that you had been sued. So there’s plenty of different reasons not to use yourself as your own registered agent. If you were spending the time money to set up an LLC, then I highly suggest you use a professional company to serve as your registered agent.

Three. You need a series LLC, but you already formed a regular LLC. A series LLC is something that they offer in Nevada and some other states, that is very business friendly. A series LLC essentially creates a master LLC, and then you can create sub little series LLCs under the master LLC instead of creating a whole new LLC for each business or property or whatever it is that you own.

A really easy, typical example is if you’re a real estate investor and you own multiple properties that you rent out, you would technically have to either create a series LLC or create a separate LLC for each property. If you have 10 properties, you’d have to create 10 LLCs for those properties separately. The reason for that is you want to insulate liability. The whole point in putting a property into an LLC is so that you are not the owner of the property anymore, and you are therefore not personally liable. If that tenant sues, the tenant would have to sue the LLC itself. If they received a judgment against the LLC, then the only thing they could get is whatever the LLC owns. So you don’t want that LLC to own more than one property.

You know, don’t want to pay it’s $350 every year to the secretary of state just to renew an LLC. If you have 10 LLCs, that’s a lot of money every year that you’re re you’re paying in renewal fees. The alternative is to set up a series LLC, where you’re only paying the one $350 charge every year to the secretary of state and you just have series within the master, meaning that if you have 10 properties, you have 10 series. So they’re all in separate little mini LLCs as I like to call them. You typically deal with them the same way you would if it was 10 separate LLCs, they would have separate bank accounts. Everything would be separate, but it would just be called a series. I mentioned this because this actually just happened to me the other day with a client. They have a business with one location in Summerlin and they want to open up a new location in Henderson, so they thought they had to form a new LLC. I explained to him that the other alternative is to just have a series LLC and each series would hold one location so there would be two series. He asked me if we could simply convert his already existing LLC into a series LLC. And unfortunately the answer is no you’re going to have to set up an entirely new series LLC. By dissolving the existing LLC, and then put it into one of the series. So it’s important to know in the beginning, if you suspect, if you are an investor and you suspect you’re going to have more than one home, then you’re definitely going to want to do a series. It’s better to just do it up front rather than creating an LLC using it for years, and then all of a sudden realizing that you need a series and then you have to open up a whole new entity.

Those are the top three mistakes I see from clients that call in when they’re talking about forming an LLC or they’re talking about an LLC that they’ve formed by themselves. Visit our Website for more information. To schedule a complimentary, 15-minute phone consultation with our attorneys call (702) 850-7798, or click here to schedule your complimentary consultation.

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