If you have a Nevada Limited Liability Company (“Nevada LLC”) and you have worked with me in the past, you know I believe it is vital for you to have an Operating Agreement. An Operating Agreement, although not legally required for a Nevada LLC, can set forth the rights and responsibilities of the Members of the Nevada LLC. It can spell out how you add additional Members; how you sell Membership Interests; and in the case of a business divorce, it serves as a prenuptial agreement.
If you do not have an Operating Agreement, now is the perfect time to get one. If you already have one, you should strongly consider amending it. Last year, the federal government enacted The Bipartisan Budget Act of 2015 (the “Act”). The Act may have serious ramifications for how your Nevada LLC gets taxed starting in 2018.
Among other recommendations for Operating Agreements, Gordon Law believes you should include the following provisions, if you do not already have them:
- A provision, so long as the Nevada LLC has fewer than 100 eligible Members, that the LLC will opt out of the new rules;
- A provision to obligate former Members or Members whose interest has been reduced to be required to reimburse the Nevada LLC for additional tax that may be determined as the result of an audit for earlier years;
- A provision to encourage Members to provide information about their personal tax status and accordingly compensate them if their personal tax status results in a reduction of the Nevada LLC’s tax level; and
- A provision that indicates a purchaser of a Membership interest will affirm that she or he has performed diligence to review the tax filing positions of the Nevada LLC. Furthermore, consider language to set forth if there will be indemnification for a purchaser if the Nevada LLC incurs a cost as a result of an audit of a prior tax year.
You should view your Operating Agreement as your playbook for your Nevada LLC. The federal government has now set the field to require additional plays. Please contact Gordon Law for a review of your Operating Agreement or to assist you in drafting one.