Business Formation Documents: A Complete Guide for Small Business Owners

Introduction

Key Things to Know

1. 1

   Your choice of business structure (sole proprietorship, partnership, LLC, corporation) determines which formation documents you need and affects taxation, liability, and operational requirements.

2. 2

   MWBEs should prepare additional documentation for certification programs that can provide access to special contracting opportunities and resources.

3. 3

   Formation documents should anticipate future growth and include provisions for adding investors, changing ownership, or expanding operations.

4. 4

   State requirements vary significantly, so research your specific state's filing procedures, fees, and ongoing compliance obligations.

5. 5

   Working with a business attorney to draft or review your formation documents is an investment that can prevent costly legal issues in the future.

6. 6

   Proper formation documents not only establish your business legally but also create the foundation for business relationships, financing opportunities, and eventual business sale or succession.

7. 7

   Keep your formation documents updated as your business grows and changes to ensure they continue to serve your needs and comply with current laws.

Nevada Requirements for Business Formation Documents

• Articles of Organization/Incorporation (NRS 78.035 (Corporations), NRS 86.161 (LLCs))

  The primary document filed with the Nevada Secretary of State to legally establish a business entity. Must include the entity name, registered agent information, management structure, and authorized shares (for corporations).

• Business Name Requirements (NRS 78.039 (Corporations), NRS 86.171 (LLCs))

  Business names must be distinguishable from other registered entities and include appropriate designators (Inc., LLC, etc.). Name reservations are available for up to 90 days.

• Registered Agent Designation (NRS 77.310)

  All Nevada business entities must maintain a registered agent with a physical Nevada address for service of process. The registered agent must be available during normal business hours.

• Operating Agreement/Bylaws (NRS 86.286 (LLCs), NRS 78.115-78.140 (Corporations))

  Internal governing documents that outline ownership, management structure, voting rights, profit distribution, and operational procedures. While not required to be filed with the state, these documents are legally binding on members/shareholders.

• State Business License (NRS 76.100)

  Annual state business license required for all Nevada entities, with specific fees and renewal requirements.

• Initial List of Officers/Managers (NRS 78.150 (Corporations), NRS 86.263 (LLCs))

  Document filed with the Secretary of State listing the company's officers, directors, or managers, due within the first year of formation and annually thereafter.

• Commerce Tax Registration (NRS 363C)

  Businesses with gross revenue exceeding $4 million in a fiscal year must register for and pay Nevada Commerce Tax.

• Federal Tax ID (EIN) Requirements (26 U.S.C. § 6109)

  Businesses must obtain an Employer Identification Number from the IRS for tax filing purposes and to open business bank accounts.

• Securities Compliance (15 U.S.C. § 77a et seq. (Federal Securities Act); NRS 90.530 (Nevada Securities Law))

  Issuance of shares or membership interests must comply with federal and state securities laws, including potential exemptions and disclosure requirements.

• Business Purpose Statement (NRS 78.035(1)(b) (Corporations), NRS 86.161(1)(b) (LLCs))

  Nevada requires a statement of business purpose in formation documents, but allows for broad 'any legal purpose' language, providing flexibility for business operations.

• Series LLC Provisions (NRS 86.161(1)(e))

  Nevada allows for the creation of Series LLCs, which permit multiple segregated asset pools within a single LLC structure, each with liability protection from the others.

• Foreign Entity Registration (NRS 80.010 (Foreign Corporations), NRS 86.544 (Foreign LLCs))

  Out-of-state businesses operating in Nevada must register as foreign entities with the Secretary of State and maintain compliance with Nevada laws.

• Corporate Director Requirements (NRS 78.115)

  Nevada corporations must have at least one director, but there are no residency requirements for directors, officers, or shareholders.

• Business Privacy Provisions (NRS 78.235 (Corporations), NRS 86.343 (LLCs))

  Nevada offers enhanced privacy protections for business owners, allowing the use of nominee officers and directors, and not requiring disclosure of member/owner information in public filings.

• Corporate Share Structure (NRS 78.035(1)(d))

  Nevada corporations must specify the number and classes of authorized shares in their Articles of Incorporation, including voting rights and preferences.

• Business Taxation Elections (26 U.S.C. § 1361-1379 (S-Corporations); 26 U.S.C. § 701-777 (Partnerships))

  Formation documents should address intended tax treatment (e.g., S-Corporation election, partnership taxation) and include provisions that support the chosen tax structure.

• Indemnification Provisions (NRS 78.7502 (Corporations), NRS 86.411 (LLCs))

  Nevada law permits broad indemnification of officers, directors, managers, and members, which should be addressed in formation documents.

• Business Fiduciary Duties (NRS 78.138 (Corporations), NRS 86.286(7) (LLCs))

  Formation documents may modify certain fiduciary duties of managers, members, or directors, as permitted by Nevada law, which allows for significant flexibility in this area.

• Anti-Money Laundering Compliance (31 U.S.C. § 5311-5332 (Bank Secrecy Act))

  Businesses must comply with federal anti-money laundering laws, which may require implementation of compliance programs and reporting suspicious activities.

• Dissolution Provisions (NRS 78.575-78.655 (Corporations), NRS 86.491-86.505 (LLCs))

  Formation documents should include procedures for voluntary dissolution, winding up affairs, and asset distribution upon termination of the business.