Thursday, December 22, 2011

Series Limited Liability Company with a Nevada On-Shore Trust

Here in Nevada, we are lucky.  First, as far as natural disasters, we don’t have to worry about hurricanes, tsunamis, blizzards (at least here in Las Vegas).  Tornados are highly unlikely and we have no track record of regular earthquakes.  Second, we’re blessed with pretty decent weather most of the year.  Last but not least, we have the best domestic asset-protection trust statutes in the country!
We’ve talked at length on our blog about the Nevada On-Shore Trust.  Please take a minute to look at our newly revised website and tell us what you think.
I really wanted to take a minute and talk about an option that we have used to accompany the Nevada On-Shore Trust.  We regularly team one or more limited liability companies (LLCs) with the Nevada On-Shore Trust to maximize the protection we are seeking for our clients.  For clients with multiple investment properties, or for clients with a broad range of investments that deserve isolation of risk, we have often opted to utilize a Nevada series LLC with the Nevada On-Shore Trust.
A series LLC can be illustrated by the following example:  Imagine the series LLC as a building with four walls and a roof.  Within that building, one could build out individual rooms.  Each room can contain furniture and the furniture in one room does not belong to another room.
The series LLC is like the building.  There is one LLC that is formed with the Nevada Secretary of State, this is sometimes called the “container” LLC.  This means that there is one initial filing fee, and one annual fee.  Within the “container”, one can then begin to create the “series.”  The statutes authorize additional companies to be created and each series is a separate and distinct entity.  The assets and liabilities of each series is separate and apart from the other companies.  Each series must maintain its own separate books and records, should have a separate bank account, and each series is provided its own operating agreement.
The primary advantage to the series LLC is that one can accomplish the goal of having a separate LLC for individual assets (such as investment rental properties) while saving money on state filing fees that might otherwise be prohibitive.
The one down-side to a series LLC is that, from our experience, it is best to keep the series operating only in the State of Nevada.  Perhaps the series LLC would work in other states without too much effort if it is another state that recognizes series LLCs, such as Utah.  But it has proven difficult to achieve foreign LLC status in states that are unfamiliar with the series LLC.  This is because each series does not have its own record with the Secretary of State; therefore we cannot obtain a certificate of good standing for each series.  The only proof of existence is for the entire “container.”  But for clients that have limited their investments to Nevada alone, the series LLC is a nice option when a large number of LLCs has been recommended by counsel.


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