Nevada LLC Operating Agreement

Why should a Nevada LLC have an operating agreement?

A Nevada LLC should have an operating agreement because a company cannot act for itself. In order to operate, LLCs require real humans (and other entities) to carry out company operations.

A Nevada LLC “may, but is not required to, adopt an operating agreement,” according to NV Rev Stat § 86.286 (2019). However, you will need an operating agreement to maintain your LLC. Here’s why:

1. Your operating agreement proves you own your LLC.

You’ll be asked to show your operating agreement when you open a bank account for your LLC, which is a crucial step in maintaining your limited liability status.

2. An operating agreement can help reinforce your limited liability status.

To benefit from limited liability status, business owners must show that their LLC is its own legal entity separate from its members. One way to do this is to open a separate bank account for your LLC. Another way is to create (and follow) an operating agreement.

3. An operating agreement can help head off misunderstandings.

People won’t always be on the same page—that’s life. But with an operating agreement to establish agreed-upon rules and procedures for your LLC, you can prevent those misunderstandings from flaring up into bigger problems down the line.

4. An operating agreement can override Nevada’s default laws.

Without an operating agreement, your LLC will automatically be governed by Nevada’s LLC statutes. The problem is that these default laws might not fit your business needs. An operating agreement enables you to adjust many aspects of company operations—without defying state laws—to best suit your LLC.

Nevada Case Law

We asked our lawyers for an example of how an operating agreement can make or break your LLC. Here’s what they said.*

“Consider the case of Maya I-215, LLC v Moore, where the LLC’s manager believed that some individual members received unauthorized fees to the detriment of other members of the LLC. Consequently, the manager initiated litigation attempting to recover those unauthorized fees. The offending individuals tried to collaterally attack the manager’s efforts by asserting to the courts that the manager lacked standing (legal concept determining who is permitted to file a lawsuit) to bring and continue litigation against the offending individuals. Fortunately for the other LLC members, the members had previously adopted and maintained an operating agreement and the courts gave weight to the operating agreement’s provision authorizing the LLC manager to institute, prosecute, and defend against any proceeding on behalf of the LLC.

“Had the members failed to adopt and maintain an operating agreement, untold amounts of resources would have been expended litigating and resolving this dispute. For these reasons (and more), a reasonably prudent business owner would (and should) adopt and maintain an operating agreement.”

What is included in a Nevada operating agreement?

Your operating agreement can include anything (within the law) not already covered by Nevada’s statutes. But a strong operating agreement is essential, and should include information about:

• Transfer of membership interest
• Voting rights and decision-making powers
• Initial contributions
• Profits, losses, and distributions
• Management
• Compensation
• Bookkeeping procedures
• Dissolution