Nevada is known as a leading jurisdiction not just for protecting assets in trust, but also for the creditor protection afforded to business entities and their owners. A Nevada limited liability company ("LLC") or Nevada limited partnership ("LP") may be an integral part of an asset protection plan. These types of business entities insulate the owner’s assets from liabilities associated with the assets of the entity (for example, rental real estate). In addition, Nevada LLCs or LPs are also protected from external creditors (creditors of the owners of the entity) by the “charging order.” A charging order is the sole remedy available to a creditor of a member or limited partner of a Nevada LLC or LP. The charging order acts as a lien against the debtor-member’s interest in the entity. This means that the creditor cannot force a sale or liquidation of the underlying assets of the LLC or LP, but can receive what would otherwise be distributed to the debtor-member/partner up to the creditor’s judgement amount.
In addition to superior charging order laws related to Nevada LLCs and Nevada LPs, Nevada is also one of a handful of states that allows for the creation of Series LLCs. A Series LLC is a way to segregate assets and liabilities under the same umbrella, to limit the filing requirements associated with multiple business entities. For example, if you have three rental properties, those properties could be placed into one Nevada LLC. If the LLC is a regular LLC rather than a Series LLC, if there is a liability associated with one of the rental properties, the equity in all three properties owned by the LLC is exposed. Before Series LLCs, clients might establish three separate LLCs, one for each property. This segregates the liabilities so that if there was an incident with one property, the other two properties would not be exposed. However, separate filing fees would be required for each of the three separate LLCs. With a Series LLC, each property could be placed into a separate series/cell of the Series LLC, thereby obtaining the same liability protection if there were three separate and distinct LLCs. However, for Nevada filing purposes, there would be only one legal entity, and therefore only one set of filing fees associated with the maintenance of the entity.
If you already have a Nevada LLC, LP or corporation and are interested in our Registered Agent services, or if you would like to see how to utilize a business entity to decrease creditor exposure, please contact us.