Many professionals and business owners operate as LLCs because of flexible taxation and protection from liability. However, many of these same people are not aware of the value of LLCs as an estate planning tool.
Speak with a seasoned estate planning attorney at Cross Law Group about how you can use LLCs to preserve your family’s assets and transfer wealth tax efficiently. One of our Reno LLC formation lawyers can answer all your questions about incorporating LLCs into your asset preservation strategy.
The first step in setting up an LLC is to name the business. You must check with the Nevada Secretary of State’s online portal to be sure the name you want is available. Once you’ve decided on a name, you must identify someone to serve as your LLC’s registered agent. Your registered agent must have a permanent Nevada address and be open and available to accept service of process during regular business hours.
You also must prepare Articles of Organization. According to Nevada Revised Statutes § 86.161, the Articles describe and identify the purpose of the business, its organizational structure, and its officers and managers. You must submit them and other supporting documents to the Secretary of State, who will review the Articles and issue a certificate of approval if it satisfies the requirements.
An operating agreement is not required by law but is essential when using an LLC for estate planning purposes in Reno. Cross Law Group will ensure that the Articles of Organization, ownership and management structure, and operating agreements all support the purpose they are intended to serve in the estate plan.
LLCs can be useful for high-net-worth families to transfer family wealth to future generations. When an asset, such as a family business or real estate holdings, is placed within an LLC structure, the owner can gradually transfer ownership to the beneficiaries by gifting membership interests over time. This approach allows for a gradual wealth transfer without physically dividing the asset. Through carefully structured operating agreements, the original owner can also maintain management authority even as ownership is transferred. This way, the gifts would convey a membership interest in the LLC but no managerial authority.
The income from the business would be distributed among the family members, which could reduce the family’s overall tax burden if the recipients are in lower tax brackets. This strategy can also avoid or limit gift taxes compared to simply transferring the underlying assets directly. This is because the value of the gifts would be discounted for gift tax purposes because the LLC interests are illiquid and have no management rights.
Numerous business, tax, and familial variables must be accounted for when transferring a Reno family business, and it is essential to have candid discussions with everyone involved, including your lawyer. However, the LLC can be an effective vehicle for a tax-efficient transfer.
Many families and individuals own rental properties under their personal names. While rental income can be a significant source of cash flow and wealth building, rental property ownership also brings potential liability. Organizing these holdings into LLCs can protect the owners’ personal assets from lawsuits and other creditor claims related to the rental properties.
One approach is to establish separate LLCs in Reno to own each property, with each entity handling the business of owning and managing its respective rental property. These individual LLCs can then be owned by a holding company LLC. Then holding company can remain passive while individual property LLCs have separate management arrangements.
The advantage of this strategy is that profits can flow up the chain to the holding company and ultimately to you; but when there is a judgment or other liability entered against one of the properties, the risk is segregated to that LLC and cannot impact the other properties the holding company owns. You, as owner of the holding company LLC, protect and preserve your assets.
LLCs are popular means of organizing a business, but they can be extremely effective estate planning tools. LLCs can insulate your businesses from risk and allow you to make tax-efficient gifts to your loved ones.
You will be better prepared when you work with a trusts & estates attorney who has extensive knowledge of the legal intricacies involved with business, taxation, and estate planning. Reach out to a Reno LLC formation lawyer at Cross Law Group to explore how you can use LLCs for liability protection.