Important Nevada Statutes

Nevada Revised Statutes are by far the strongest in the Nation when it comes to protecting officers, directors and shareholders of corporation as well as members and managers of limited liability companies. Where there are literally hundreds of Nevada statutes effecting business entities, below are listed what we feel are the most important to the small business owner.

Nevada Indemnification

NRS 78.747  Liability of stockholder, director or officer for debt or liability of corporation.

  1. Except as otherwise provided by specific statute, no stockholder, director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the stockholder, director or officer acts as the alter ego of the corporation.
  2. A stockholder, director or officer acts as the alter ego of a corporation if:
    1. The corporation is influenced and governed by the stockholder, director or officer;
    2. There is such unity of interest and ownership that the corporation and the stockholder, director or officer are inseparable from each other; and
    3. Adherence to the corporate fiction of a separate entity would sanction fraud or promote a manifest injustice.
  3. The question of whether a stockholder, director or officer acts as the alter ego of a corporation must be determined by the court as a matter of law.

    (Added to NRS by 2001, 3170)

NRS 86.371  Liability of member or manager for debts or liabilities of company.

Unless otherwise provided in the articles of organization or an agreement signed by the member or manager to be charged, no member or manager of any limited-liability company formed under the laws of this State is individually liable for the debts or liabilities of the company.

(Added to NRS by 1991, 1300; A 1995, 2112)

Charging Order Protection (LLC)

NRS 86.401  Rights and remedies of creditor of member.

  1. On application to a court of competent jurisdiction by a judgment creditor of a member, the court may charge the member’s interest with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the member’s interest.
  2. This section:
    1. Provides the exclusive remedy by which a judgment creditor of a member or an assignee of a member may satisfy a judgment out of the member’s interest of the judgment debtor.
    2. Does not deprive any member of the benefit of any exemption applicable to his interest.

(Added to NRS by 1991, 1302; A 2001, 1393, 3199; 2003, 20th Special Session, 71)

Charging Order Protection (Corporation) Exclusive to Nevada

NRS 78.746  Action against stockholder by judgment creditor; limitations.

    
  1. On application to a court of competent jurisdiction by a judgment creditor of a stockholder, the court may charge the stockholder’s stock with payment of the unsatisfied amount of the judgment with interest. To the extent so charged, the judgment creditor has only the rights of an assignee of the stockholder’s stock.
  2. This section:
    1. Applies only to a corporation that:
      1. Has more than 1 but fewer than 75 stockholders of record at any time.
      2. Is not a subsidiary of a publicly traded corporation, either in whole or in part.
      3. Is not a professional corporation as defined in NRS 89.020.
    2. Does not apply to any liability of a stockholder that exists as the result of an action filed before July 1, 2007.
    3. Provides the exclusive remedy by which a judgment creditor of a stockholder or an assignee of a stockholder may satisfy a judgment out of the stockholder’s stock of the corporation.
    4. Does not deprive any stockholder of the benefit of any exemption applicable to the stockholder’s stock.
    5. Does not supersede any private agreement between a stockholder and a creditor.

(Added to NRS by 2007, 2639)

Bearer Shares Not Allowed In Nevada

NRS 78.235  Stock certificates: Validation; facsimile signatures; un-certificated shares and informational statements; replacement.

1. Except as otherwise provided in subsection 4, every stockholder is entitled to have a certificate, signed by officers or agents designated by the corporation for the purpose, certifying the number of shares in the corporation owned by the stockholder. A corporation has no power to issue a certificate in bearer form, and any such certificate that is issued is void and of no force or effect.

4. Unless otherwise provided in the articles of incorporation or bylaws, the board of directors may authorize the issuance of un-certificated shares of some or all of the shares of any or all of its classes or series. The issuance of un-certificated shares has no effect on existing certificates for shares until surrendered to the corporation, or on the respective rights and obligations of the stockholders. Unless otherwise provided by a specific statute, the rights and obligations of stockholders are identical whether or not their shares of stock are represented by certificates.

(NRS A 1965, 1012; 1987, 579; 1991, 1226; 1993, 959; 2001, 1367, 3199; 2007, 2417)

Small Business Tax Tips

Office at Home
The Internal Revenue Code has been liberalized to allow a Corporation or taxable-LLC to reimburse its employees for their office at home expense as long as the office at home is used regularly and exclusively for administrative and management activities of the business, and/or for storing records, inventory or product supplies. The reimbursement could be paid on a monthly or yearly basis, is deductible by the Corporation or taxable-LLC, and is not included in the income of the employee. The items which can be included in the office at home calculation are homeowners insurance, cleaning, maintenance, utilities, and telephone. The reimbursement is based on the percentage of office at home space in relation to the overall space in the home. Although depreciation could be taken on the office at home space, it would be recaptured upon the sale of the home. In order not to lose any of the long term capital gain exclusion ($500,000 for married couples and $250,000 for single tax payers), it is advisable to not take the office at home reimbursement during the last three years before your home is sold.

Children as Tax Shelters
Minor children, between the ages of 7 and 18, of business owners can become paid employees for working for the business. The child may earn up to $4,850 without having to file a federal tax return. The child can additionally contribute up to $5,000 of his or her earned income to an IRA or Roth IRA. This effectively allows the child $9,850 in tax free income. Social Security contributions have to be made while children are employed by a Corporation or LLC and Form W4E exemption from withholding tax would be filed.
It is wise to have a written job description showing the reasonable and ordinary duties to be performed by the child and a log showing dates and times the duties were carried out.
Loans vs. Capital Contribution
From time to time we may be required to provide our LLC or Corporation with additional operating capital. You may want to consider lending the funds to your entity rather than contributing it as capital. Loans you make to the business can increase your basis for purposes of deducting losses passed through to you, and the repayment of the principal back to you isn't taxable.
Be sure to document the loan so that the IRS does not charge that it is a capital contribution (which could cause repayment to be characterized as a taxable dividend). The appropriate corporate officer should sign a promissory note setting forth repayment terms (e.g., interest rate, dates for repayment of principal). And the entity should carry the obligation as a loan on its books.