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A GLOBAL APPROACH TO LEGAL SOLUTIONS

Nevada Limited Liability Companies


Each year, thousands of individuals and companies incorporate in Nevada, which is fast establishing itself as the most favorable corporate jurisdiction of the West. Nevada offers many attractive advantages friendly to business. This booklet will explain, among other things, the advantages of Limited Liability Companies (commonly referred to as “LLCs”), and how to form and operate an LLC. This booklet documents the formation and operation of LLCs, contains a glossary (“the glossary”) of legal terms, and lists facts about the State of Nevada.


CONTENTS

A. Highlights ........................................................................................................

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B. Governing Law …………………………………………………………….....

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C. Definition …………………………………………………………………….

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D. Uses of an LLC ……………………………………………………………….

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E. Articles of Organization …................................................................................

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What information should be included in the Articles of Organization …...

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What it is not necessary to set out in the Articles of Organization ……….

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What are the requirements relating to LLC‟s name ………………………

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Resident Agent and Registered Office ……………………………………

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Records to be kept at the Registered Office ………………………………

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When is the LLC legally organized ……………………………………….

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Amendment of Articles of Organization ………………………………….

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F. Management …………………………………………………………………...

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General Powers …………………………………………………………....

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Manager or Member(s) ……………………………………………………

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Powers of Attorney ………………………………………………………..

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G. Operating Agreement ………………………………………………………….

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Management by Manager or Members ……………………………………

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Liability of member or manager for debts or liabilities of company ……...

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Liability to company of member or contributor to capital ………………...

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Limitation on authority to contract debt or incur liability ………………...

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Acquisition, ownership and disposition of property ………………………

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Contributions to capital …………………………………………………...

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Withdrawal of member: Limitation ……………………………………….

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Rules regarding Distribution of Profits …………………………………...

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Prohibition on Distribution of Profits …………………………………….

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Distribution, Status of Member or Transferee ……………………………

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Transfer of Assignment of Member‟s Interest; Rights of Transferee; …….

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Substituted Members


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H. Registration of a Foreign LLC ………………………………………………...

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Requirements ……………………………………………………………..

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Issuance of Certificate of Registration by Secretary of State for a foreign ...

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LLC 

Is there any possibility of redomiciling IBCs to Nevada …………………

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I. Service of Process, Notice or Demand Upon Resident Agent ………………...

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J. Certificate of Existence ……………………………………………………….

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K. Documents in language other than English ……………………………………

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L. Annual Filing of list of Managers or Managing Members …………………….

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Certificate Authorizing LLC to Transact Business ……………………….

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Consequences of Not Filing Annual List / Penalties ……………………...

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Procedure and Condition for Reinstatement ……………………………...

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Formation Costs …………………………………………………………..

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Annual Costs – Resident Agent and Registered Office …………………..

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M. Shelf Companies ………………………………………………………………

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N. Income Tax Treatment of Nevada Offshore LLC‟s ……………………………

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O. Glossary of Useful Terms ……………………………………………………..

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INCORPORATING IN NEVADA

A.

HIGHLIGHTS What are the advantages of operating a Nevada LLC for non-resident/non US citizens?  Excellent political stability  Flexible business vehicle offering ease of use and financial privacy  Consistent legal system – friendly corporate laws  Advanced infrastructure  LLC Members that conduct no business in the US and have no US source income, deductions or credits are not subject to US federal income tax, and are not required to file a US federal income tax return  LLCs may have as little as one (1) member  Limited liability of owners (members) and managers  Nevada has no State tax, no franchise tax, no inventory tax, no inheritance tax  Nevada has no IRS information-sharing agreement (there is no exchange of information between the State of Nevada and any other State or Federal agency)  Number and type (individual or corporate) of members is unrestricted  More than one class of „membership interest‟ is allowed, which provides for flexible structuring  Minimal reporting and disclosure requirements  Members and Managers may be individuals or corporate entities  Under new rules, Nevada LLCs may have a perpetual duration  Use of Apostille should documentation need to be legalized

B.

GOVERNING LAW

Nevada LLCs are governed by Chapter 86, Nevada Revised Statutes (“NRS”).

C.

DEFINITION

An LLC is a business structure best described as a hybrid between a partnership() and a corporation(*) that gives its owners the best of both worlds – a “pass through”(*) of all profits and losses to the owners without taxation on the entity itself, as in a partnership, and a shield from personal liability, as in a corporation. An S corporation(*) and a limited partnership also offer these advantages. Unlike an S corporation, however, an LLC is actually a non-corporate entity. State laws, which would require a board of directors and officers and would dictate the adoption of by-laws, do not apply.

(*) See the Glossary (**) The Nevada Statutes contain a separate chapter governing Banking, Trust and Mutual Funds activities. An LLC is not eligible to carry out this kind of activities.


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Also, unlike the limited partner in a limited partnership, a member of an LLC may participate actively in its management without risking loss of the limitation on personal liability. If agreed, managers may manage the LLC. There are no limitations with respect to the residency, nationality or number of members.

D.

USES OF AN LLC

A Nevada LLC may be organized for any lawful purpose, except insurance(**) (see further details of the powers of an LLC under the heading “MANAGEMENT”)

E.

ARTICLES OF ORGANIZATION What information should be included in the Articles of Organization(*)?  The name of the LLC;  The name, complete street address and mailing address in Nevada of its Resident Agent;  The name and post office or street address, either residence or business, of each of the organizers executing the articles; and  If the LLC is to be managed by:  One or more managers, the name and physical address or street address, either residence or business, of each manager; or  The members, the name and post office or street address, either residence or business, of each member.

Any other provision, not inconsistent with the law, that the members elect to set out in the Articles of Organization for the regulation of the internal affairs of the LLC, including any provisions which under NRS Chapter 86 are required or permitted to be set out in the Operating Agreement of the LLC. The Articles of Organization must be submitted together with a certificate of acceptance of appointment signed by the LLC‟s Resident Agent. It is not necessary to set out in the Articles of Organization:  The rights, if any, of the members to contract debts on behalf of the LLC; or  Any of the powers enumerated in NRS Chapter 86. What are the requirements relating to the LLC’s name? The name of an LLC formed under the provisions of this chapter must contain the words “Limited Liability Company”, “Limited Company”, or “Limited”, or the abbreviations “Ltd.”, “L.L.C.”, “L.C.”, “LLC”, or “LC”. The word “Company” may be abbreviated as “Co.” The use of the following words or any word conveying a similar meaning is restricted: “Accountant”, “Accounting”, “Accountancy”, “Auditors” or “Auditing”.


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The name proposed for an LLC needs to be checked for its availability and may be reserved for a period of 90 days, subject to the payment of a fee of US$50.00. Resident Agent and Registered Office Each LLC shall have a Resident Agent who must have a street address for the service of process. The street address of the Resident Agent is the Registered Office of the LLC in Nevada. Our company will provide both services and, as Resident Agent, will sign the Articles of Organization. Records to be kept at the Registered Office Each LLC shall continuously maintain in this state an office (namely, the Registered Office), which may but need not be its place of business in this state, at which it shall keep, unless otherwise provided by an Operating Agreement:  A current list of the full name and last known business address of each member and manager, separately identifying the members in alphabetical order and the managers, if any, in alphabetical order;  A copy of the filed Articles of Organization and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any document has been executed; and  Copies of any then effective operating agreement of the LLC. Records kept pursuant to this section are subject to inspection and copying at the reasonable request, and at the expense, of any member during ordinary business hours, unless otherwise provided in an operating agreement. When is the LLC legally organized? Upon filing of the Articles of Organization and the certificate of acceptance of the Resident Agent and the payment of filing fees, the LLC is considered legally organized pursuant to NRS Chapter 86. An LLC must not transact business or incur indebtedness, except that which is incidental to its organization or to obtaining subscriptions for or payment of contributions, until the Secretary of State has filed the Articles of Organization and the certificate of acceptance. Amendment of Articles of Organization The Articles of Organization of an LLC may be amended for any purpose not inconsistent with the law, as determined by all of the members or managers or permitted by the Articles or operating agreement. An amendment must be made in the form of a certificate setting forth:  The name of the LLC;  The date of filing of the Articles of Organization; and  The amendment to the Articles of Organization. The certificate of amendment must be signed by a manager of the LLC, or by a member if management is not vested in a manager.


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F.

MANAGEMENT

1.

General Powers

A Nevada LLC may carry out any activities not prohibited by law. The general powers of a Nevada LLC are similar to those of a standard corporation. Therefore, an LLC may:  Sue and be sued, complain and defend, in its name;  Purchase any real or personal property, or an interest therein, wherever situated;  Sell, mortgage, pledge, lease, exchange, transfer and otherwise dispose of all or any part of its property and assets;  Lend money to and otherwise assist its members;  Deal in and with shares or members‟ interests;  Make contracts and guarantees and incur liabilities, borrow money at such rates of interest as the LLC may determine;  Lend, invest and reinvest its money;  Conduct its business, carry on its operations and have and exercise the powers granted in any foreign country;  Appoint managers and agents;  Cease its activities and surrender its Articles of Organization;  Exercise all powers necessary or convenient to achieve any of the purposes for which the LLC is organized. 2.

Manager or Member(s)

There must be at least one manager or member. Manager(s)/member(s) can be an individual or a company. Member(s)/manager(s) need not be residents of the United States of America. 3.

Powers of Attorney

Depending on who is handling the management of the LLC, the manager(s) or member(s) may grant a special or general power of attorney to any person, whether connected or not with the LLC, named “the Agent”. Our standard form of general power of attorney allows the Agent to carry out all management activities, including opening bank accounts and entering into any type of contract.

G.

OPERATING AGREEMENT

An LLC may adopt an Operating Agreement. The Operating Agreement is similar to the by-laws of a corporation or a partnership agreement. NRS Chapter 86 refers to several matters that may be included in the Operating Agreement, namely:  Provisions authorizing the making and altering of Operating Agreements that provide for the administration and regulation of the LLC  Certain aspects of indemnification of members and managers


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   

Formula for distribution of profits and losses; distribution of assets after dissolution Transferability or assignment of a member‟s interest Members‟ liability for payment of capital contributions Management of LLC by members or managers

Management by Manager or Members The management of an LLC may be vested in its members in proportion to their contribution to its capital, as adjusted from time to time to reflect properly any additional contributions or withdrawals by the members. The management of the LLC may also be vested in a manager or managers, who may but need not be members, in the manner prescribed by the Operating Agreement of the LLC. The manager or managers also hold the offices and have the responsibilities accorded to them by the members and set out in the Operating Agreement. Liability of member or manager for debts or liabilities of company No member or manager of any LLC formed under the laws of Nevada is individually liable for the debts or liabilities of the LLC. A member of an LLC is not a proper party to proceedings by or against the LLC, except where the object is to enforce the member‟s right against or liability to the LLC. Liability to company of member or contributor to capital  A member is liable to an LLC:  For a difference between his contributions to capital as actually made and as stated in the Articles of Organization or Operating Agreement as having been made; and  For any unpaid contribution to capital which he agreed in the Articles of Organization or Operating Agreement to make in the future at the time and on the conditions stated in the Articles of Organization or Operating Agreement.  A member holds as trustee for the LLC:  Specific property stated in the Articles of Organization or Operating Agreement as contributed by him, but which was not contributed or which has been wrongfully or erroneously returned; and  Money or other property wrongfully paid or conveyed to him on account of his contribution or the contribution of a predecessor with respect to his member‟s interest.  The liabilities of a member as set out in this section can be waived or compromised only by the consent of all of the members, but a waiver or compromise does not affect the right of a creditor of the LLC to enforce the liabilities if he extended credit or his claim arose before the effective date of an amendment of the Articles of Organization or Operating Agreement effecting the waiver or compromise.  When a contributor has rightfully received the return in whole or in part of his contribution to capital, the contributor shall be liable to the LLC for any sum, not in excess of the return with interest, necessary to discharge its liability to all of its creditors who extended credit or whose claims arose before the return.


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Limitation on authority to contract debt or incur liability Except as otherwise provided in the LLC‟s Articles of Organization, if the LLC is managed by its members, a specific provision must be included in the Articles of Organization allowing members to contractually bind the LLC. Acquisition, ownership and disposition of property Real and personal property owned or purchased by an LLC must be held and owned, and conveyance made, in the name of the LLC. Instruments and documents providing for the acquisition, mortgage or disposition of property of the LLC are valid and binding upon the LLC if executed by one or more managers of an LLC which has a manager or managers or as provided by the Articles of Organization of an LLC in which management has been retained by the members. Contributions to capital The contributions to capital of a member of an LLC may be in cash, property or services rendered, or a promissory note or other binding obligation to contribute cash or property or to perform services. Withdrawal of member: Limitation Except as otherwise provided in the Articles of Organization or the Operating Agreement, a member may not withdraw as a member from an LLC before the dissolution and winding up of the LLC. If the member has the right to resign or withdraw, he is entitled to receive, within a reasonable time after withdrawal, the fair market value of his interest on the date of resignation or withdrawal. Rules regarding Distribution of Profits An LLC may, from time to time, divide the profits of its business and distribute them to its members and any transferee as his interest may appear, upon the basis stipulated in the Operating Agreement. If the Operating Agreement does not otherwise provide, profits and losses must be allocated proportionately to the value, as shown in the records of the LLC, of the contributions made by each member and not returned. Prohibition on Distribution of Profits  A distribution of the profits of an LLC must not be made if, after giving it effect:  The LLC would not be able to pay its debts as they become due in the usual course of business; or  Except as otherwise specifically permitted by the Articles of Organization, the total assets of the LLC would be less than the sum of its total liabilities.  The manager or, if management of the LLC is not vested in a manager or managers, the members may base a determination that a distribution is not prohibited under this section on:  Financial statements prepared on the basis of accounting practices that are reasonable in the circumstances;  A fair valuation, including unrealized appreciation and depreciation; or  Any other method that is reasonable in the circumstances.


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Distribution, Status of Member or Transferee  Unless otherwise provided in the Operating Agreement, a member, regardless of the nature of his contributions, or a transferee, regardless of the nature of his predecessor‟s contributions, has no right to demand or receive any distribution from an LLC in any form other than cash.  Except as otherwise provided in NRS 86.391 and 86.521, and unless otherwise provided in the Operating Agreement, at the time a member or transferee becomes entitled to receive a distribution, he has the status of and is entitled to all remedies available to a creditor of the LLC with respect to the distribution. Transfer or Assignment of Member’s Interest; Rights of Transferee; Substituted Members  The interest of each member of an LLC is personal property. The Articles of Organization or Operating Agreement may prohibit or regulate the transfer of a member‟s interest. Unless otherwise provided in the Articles or Agreement, a transferee of a member‟s interest has no right to participate in the management of the business and affairs of the LLC or to become a member unless a majority in interest of the other members approve the transfer. If so approved, the transferee becomes a substituted member. The transferee is only entitled to receive the share of profits or other compensation by way of income, and the return of contributions, to which his transferor would otherwise be entitled.  A substituted member has all the rights and powers and is subject to all the restrictions and liabilities of his transferor, except that such substitution does not release the transferor from any liability to the LLC.

H. REGISTRATION OF A FOREIGN LLC Requirements A foreign LLC may be registered with the Secretary of State of Nevada to transact business in Nevada provided that it is granted the relevant Certificate of Registration. The application must be submitted to the Secretary of State, duly executed by a member and notarized, and shall set forth:  The name of the foreign LLC and, if different, the name under which it proposes to register and transact business in this state;  The state and date of its formation;  The name and address of the Resident Agent that the foreign LLC elects to appoint;  A statement that the Secretary of State is appointed the agent of the LLC for service of process if the Resident Agent‟s authority has been revoked or if the Resident Agent cannot be found or served with the exercise of reasonable diligence;  The address of the office required to be maintained in the state of its organization by the laws of that state or, if not so required, of the principal office of the LLC;  The name and business address of the manager(s) (or member(s) if management is vested in her/him/it/them) – a P. O. Box number is not accepted; and  The address of the office at which is kept a list of the names and addresses of the members and their capital contributions, together with an undertaking by the foreign LLC to keep those records until the foreign LLC‟s registration in Nevada is cancelled or withdrawn.


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Issuance of Certificate of Registration by Secretary of State for a Foreign LLC If the Secretary of State finds that an application for registration conforms to law and all requisite fees have been paid, he shall issue a certificate of registration to transact business in Nevada and mail it to the person who filed the application or his representative. Is there any possibility of redomiciling IBCs to Nevada? Yes, we have the pleasure to inform you about the domestication (redomiciliation) or conversion of legal entities to Nevada, to wit:  Domestication A foreign corporation, a limited liability company, a limited partnership, a business trust or any other type of juridical person governed by the laws of any foreign country or jurisdiction other than the United States of America ("USA"), the District of Columbia and any other dependency of the USA, (hereinafter referred to as the "foreign entity") may become domesticated (means redomiciliated) in Nevada as a limited liability company ("LLC"), provided that the law of the foreign company allows the domestication or conversion to another jurisdiction.  Procedures and Requirements  The foreign entity must adopt the Articles of Domestication. (There exists a pro-forma adopted by the Secretary of State of Nevada )  The foreign entity must adopt the Articles of Organization. (We would use our standard proforma.)  The Articles of Domestication must be approved by the governing body that rules the internal affairs of the foreign entity.  Effects of Domestication  When a domestication becomes effective, all rights, privileges, powers, all property owned by the foreign entity, all debts due to the foreign entity, and all causes of action belonging to the foreign entity are vested in the domestic LLC and become the property of the domestic LLC to the same extent as vested in the foreign entity immediately before domestication.  When a foreign entity is domesticated, the domestic LLC resulting from the domestication is for all purposes deemed to be the same entity as the foreign entity. Unless otherwise agreed by the owners of the foreign entity or as required pursuant to applicable foreign law, the domestic LLC resulting from the domestication is not required to wind up its affairs, pay its liabilities or distribute its assets. The domestication of a foreign entity does not constitute the dissolution of the foreign entity.  Conversion A corporation, an LLC, a general partnership or any other type of juridical person from another state of the USA (hereinafter referred to as the "constituent entity") may be converted into an LLC of Nevada if a Plan of Conversion is approved.


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Procedure and Requirements  The constituent entity must approve a Plan of Conversion.  The constituent entity must adopt the Articles of Conversion. (There exists a pro-forma adopted by the Secretary of State of Nevada).  The Constituent entity must adopt the Articles of Organization. (We would use our standard proforma).

Effects of Conversion  The constituent entity is converted into a Nevada LLC and is governed by and subject to the law of Nevada;  The conversion is a continuation of the constituent entity;  The title to all real estate and other property owned by the constituent is vested in the Nevada LLC without reversion or impairment;  The Nevada LLC has all the liabilities of the constituent entity;  A proceeding pending against the constituent entity may be continued as if the conversion had not occurred or the Nevada LLC may be substituted in the proceeding for the constituent entity;  The owner's interests of the constituent entity that are to be converted into the owner's interests of the Nevada LLC are converted;  An owner of the Nevada LLC remains liable for all the obligations of the constituent entity to the extent the owner was personally liable before the conversion; and  The constituent entity is not required to wind up its affairs, pay its liabilities, distribute its assets or be dissolved, and the conversion is not deemed to be a dissolution of the constituent entity.

Time frame and costs  Time Frame The estimated time for domestication in or conversion to Nevada is approximately 4 weeks.  Costs In regard to the cost, please contact us at nevada-panamaoffice@mossfon.com for assistance.

I.

SERVICE OF PROCESS, NOTICE OR DEMAND UPON RESIDENT AGENT

The Resident Agent appointed by an LLC is an agent of the LLC upon whom any process, notice or demand required or permitted by law to be served upon the LLC may be served. This does not affect the right to serve any process, notice or demand required or permitted by law to be served upon an LLC in any other manner permitted by law.

J. CERTIFICATE OF EXISTENCE This certifies that the LLC is organized under the laws of Nevada.


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K. DOCUMENTS IN LANGUAGE OTHER THAN ENGLISH No document which is written in a language other than English may be filed or submitted for filing at the office of the Secretary of State pursuant to the provisions of NRS Chapter 86 unless it is accompanied by a verified translation of that document into the English language.

L. ANNUAL FILING OF LIST OF MANAGERS OR MANAGING MEMBERS Through its Resident Agent, an LLC shall, on or before the last day of the month in which the anniversary date of its formation occurs, annually file with the Secretary of State of Nevada, on a form furnished by him, a list containing:     

The name of the LLC; The file number of the LLC, if known; Depending on who is handling the management of the LLC, the names and titles of all of its managers or, if there is no manager, of all of its managing members; Depending on who is handling the management of the LLC, the mailing or street address, either residence or business, of each manager or managing member listed, following the name of the manager or managing member; and The signature of a manager (or managing member) of the LLC certifying that the list is true, complete and accurate.

If the LLC has had no changes in its managers or, if there is no manager, in its managing members, since its previous list was filed, no amended list need be filed if a manager or managing member of the limited liability company certifies to the Secretary of State as a true and accurate statement that no changes in the managers or managing members have occurred. Upon filing the list of managers or managing members, or certifying that no changes have occurred, the LLC shall pay to the Secretary of State a fee of US$125.00 Certificate Authorizing LLC to Transact Business If an LLC has filed the annual list of managers or members and designation of a Resident Agent in compliance with NRS Chapter 86, and has paid the appropriate fee for the filing, the canceled check received by the LLC constitutes a certificate authorizing it to transact its business within this state until the last day of the month in which the anniversary of its formation occurs in the next succeeding calendar year. If the LLC desires a formal certificate upon its payment of the annual fee, its payment must be accompanied by a self-addressed, stamped envelope. Consequences of Not Filing Annual List / Penalties  The Secretary of State of Nevada sends a notice of the fee due 60 days before the deadline.  Each LLC required to make a filing and pay the fee prescribed in NRS Chapter 86 that refuses or neglects to do so within the time provided is in default.  For default, there must be added to the amount of the fee a penalty of $75.00


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 The Secretary of State of Nevada shall notify, by letter addressed to its Resident Agent, each LLC deemed in default. The notice must be accompanied by a statement indicating the amount of the filing fee, penalties and costs remaining unpaid.  On the first day of the first anniversary of the month following the month in which the filing was required, the charter of the LLC is revoked and its right to transact business is forfeited.  If the charter of an LLC is revoked and the right to transact business is forfeited, all of the property and assets of the defaulting LLC must be held in trust by the managers or, if none, by the members of the LLC, and the same proceedings may be followed with respect to its property and assets as apply to the dissolution of an LLC. Any person interested may institute proceedings at any time after a forfeiture has been declared, but if the Secretary of State of Nevada reinstates the charter, the proceedings must be dismissed and all property restored to the LLC.  If an LLC applies to reinstate its charter but its name has been legally acquired or reserved by any other artificial person formed, organized, registered or qualified pursuant to the provisions of NRS Chapter 86, which name is on file with the office of the Secretary of State or reserved at the office of the Secretary of State pursuant to the provisions of the Chapter 86, the LLC shall submit in writing to the Secretary of State some other name under which it desires its existence to be reinstated. If that name is distinguishable from all other names reserved or otherwise on file, the Secretary of State shall issue to the applying LLC a certificate of reinstatement under that new name.  If the applying LLC submits the written, acknowledged consent of the artificial person having the name, or the person reserving the name, which is not distinguishable from the old name of the applying LLC, or a new name it has submitted, it may be reinstated under that name.  For the purposes of this section, a proposed name is not distinguishable from a name on file or reserved name solely because one or the other contains distinctive lettering, a distinctive mark, a trademark or a trade name, or any combination of these. Procedure and Conditions for Reinstatement The LLC may be reinstated if it:  Files with the Secretary of State the list of member(s) or managers -if applicable- required by NRS Chapter 86.  Pays to the Secretary of State the fees and penalties owed.  Pays a fee of US$300.00 for reinstatement. Upon request, the Secretary of State of Nevada may issue a Certificate of Reinstatement. If the charter of an LLC has been revoked for a period of five (5) consecutive years, such charter must not be reinstated. Formation Costs The costs for the formation of an LLC are set forth in our fee schedule, which is available upon request. Annual Costs – Resident Agent and Registered Office As mentioned above, NRS Chapter 86 requires all LLC´s to have a Resident Agent and a Registered Office in Nevada. Resident Agent and Registered Office fees are set forth in our fee schedule, which is available upon request.


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M.

SHELF COMPANIES

We have a number of already existing companies for sale. These companies are “clean”, that is to say, they have never traded or entered into any transaction whatsoever.

N.

INCOME TAX TREATMENT OF NEVADA OFFSHORE LLCs

There are two different income tax regimes in the United States of America, to wit: State Income Tax = Federal Income Tax =

This is collectable by each State. This is collectable by the Internal Revenue Service (“IRS”)

● Nevada has no state income tax. ● The IRS views the LLC as a pass-through entity (i.e. the IRS disregards the existence of the LLC). ● The members of an LLC are not subject to US federal income tax and are not required to file a US federal income tax return if the LLC  Does not have an office or fixed place of business within the US,  Does not engage in trade or business within the US,  Does not derive any US source income, deductions or credits, or  Does not derive any foreign source of income that is effectively connected with the US. (all referred to as “taxable activities”). ● If the LLC does engage in such taxable activities in Nevada, its members are subject to United States federal income tax.


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O. Glossary of Useful Terms Agent or Attorney in Fact:

Apostille:

Articles of Organization:

A person authorized by another to act on his behalf. An agent can enter into contracts and other legally binding functions on behalf of his principal. A method of certifying a document for use in another country pursuant to the 1961 Hague Convention. With this certification by apostille, a document is entitled to recognition in the country of intended use, and no certification or legalization by the embassy or consulate of the foreign country where the document is to be used is required. A document filed with the Secretary of State that creates a limited liability company (“LLC”). It must include the name of the LLC, its purpose, the principal address of business, the Resident Agent‟s name and address, the duration of the LLC and its members or managers. This Articles is very similar to a corporation‟s Articles of Incorporation.

Asset:

Anything owned that has monetary value.

By-laws:

By-laws are the rules and regulations adopted by a corporation for its internal governance. They usually contain provisions relating to the members, directors, officers and general corporate business. By-laws are adopted at the corporation‟s initial meeting. By-laws are a private document not filed with any state authority. By-laws are more flexible than the Articles of Organization because they are easier to amend.

C Corporation:

Any corporation that is not an S corporation.

Registration Certificate:

A document issued by the Secretary of State to a foreign LLC granting the LLC the right to do business in that state.

Limited Liability Company The document that creates an LLC in accordance with the laws of the Charter: state. This must be filed and approved by the state. Corporation:

A business formed and authorized by law to act as a single entity, although it may be owned by one or more persons. It is legally endowed with rights and responsibilities and has a life of its own independent of the owners and operators. The owners are not personally liable for debts or obligations of the corporation.

Distribution:

Payment of cash or property to a member, shareholder or partner according to his or her percentage of ownership.


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Federal Tax Identification This is a number assigned to a corporation or other business entity by Number the federal government for tax purposes. Banks generally require a tax identification number to open bank accounts. The Federal Tax Identification Number is also known as the Employer Identification Number (EIN). Fiscal year:

Any 12-month period used by a business as its fiscal accounting period. Such accounting period may, for example, run from July 1 of one year through June 30 of the next year.

Foreign LLC:

An LLC formed in one state or country but conducting some or all of its business in another state or country. It must register for a registration certificate to transact business in the other state.

IRS

Abbreviation for the Internal Revenue Service, a United States governmental agency charged with the collection of taxes.

Limited liability:

The condition in LLCs and corporations that frees owners from being personally liable for debts and obligations of the LLC, with a few taxrelated exceptions. With company or corporate debt, general creditors cannot attach the owner‟s homes, cars and other personal property.

Limited Liability Company A business entity created by legislation that offers its owners the (“LLC”): limited personal liability of a corporation and the tax advantages of a partnership. Manager:

The person, or one of several persons, designated in or selected pursuant to the Articles of Organization or Operating Agreement of an LLC. A group of managers who act much like a board of directors may operate an LLC. If an LLC is to be controlled by managers, this fact must be stated in the Articles of Organization.

Majority in interest:

A majority of the interests in the current profits of an LLC.

Member:

One who contributes capital, property or services to an LLC and in return, receives a membership interest in the LLC.

Membership interest:

The percentage of the LLC interests owned by a member at any point in time. The membership interest grants to the member the right to receive distributions from the LLC.

NRS Chapter 86:

Nevada Revised Statutes. State statutes that govern Nevada LLCs.


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Operating Agreement:

Partnership:

A statement of the general principles of an LLC, which combines information from the Articles of Organization with resolutions passed unanimously by members. It details economic and management arrangements as well as members‟ or manager rights and responsibilities. A partnership is “an association of two or more persons to carry on as co-owners of a business for profit.” In contrast to a corporation, a general partnership can come into existence without the need to file any formal papers with any state official.

Pass-Through Taxation:

The income to the entity is not taxed at the entity level; however, the entity does complete a tax return. The income or loss as shown on this return is “passed through” the business entity to the individual shareholders or interest holders, and is reported on their individual tax returns. S corporations and LLCs are both pass-though tax entities.

Pass-through tax status:

Profits that are not taxed on the company level but are distributed directly to members who report such profits as dividend income.

Pro rata:

Members receive rights or dividends based upon their percentage of ownership.

Proxy:

If a member can not attend a meeting, such member is allowed to vote by proxy. A proxy grants another individual the power to vote on his behalf.

Real property:

Real property includes land and any interest, leasehold, estate in land or any improvements on it.

Registered Office:

The office named in the Articles of Organization. The Registered Office must be where the Resident Agent is located, and needs to be the principal office or place of business of the LLC.

Resident agent:

The agent named in the Articles of Organization. The Resident Agent will receive service of process on the LLC and other important documents. The Resident Agent must be named in the Articles of Organization, and must be located in the state of incorporation or organization.

Resolution:

A resolution is a formal decision of the company which has been adopted by either the members or the board of directors.

Share:

An interest in a corporation. The total ownership of a corporation is divided into shares of stock.


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Shareholder:

Any holder of one or more shares in a corporation. A shareholder usually has evidence that he is a shareholder; this evidence is in form of a stock certificate.

Street address:

The “Street address� of a Resident Agent means the actual physical location in the State of Nevada at which a Resident Agent is available for service of process. A business owned by an individual who is solely responsible for all aspects of the business, and where the business and its owner are thus considered the same entity.

Sole proprietorship:

S Corporation:

A small business corporation which elects to be taxed as a partnership or proprietorship for federal income tax purposes. Individual shareholders enjoy the benefits under state law of limited corporate liability, but avoid corporate federal taxes.

Stock:

An equity or ownership interest in a corporation, measured in shares. Ownership of shares is demonstrated by stock certificates.

Stock certificate:

A written instrument that shows ownership of shares in a corporation.

Unanimous written consent:

Nearly all states allow directors and shareholders to act without meeting if they each give their consent to specific corporation actions in writing.


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Nevada LLCs booklet – English  

MF&Co. - Nevada LLCs booklet English. Last update June 2012