Senate Bill 350 Allows for the Creation of Nevada Restricted LLCs and LPs
July 26, 2011
On May 29, 2009, the Governor of Nevada signed into law Senate Bill 350, which allows for the creation of two new kinds of entities: Nevada Restricted LLCs and Nevada Restricted LPs. Effective October 1, 2009, Nevada becomes the first jurisdiction to offer these special types of entities. Pursuant to this new bill, Nevada Restricted LLCs and LPs now have a default statute restricting member or partner distributions for up to ten years. This default locking in the entity’s underlying assets for up to ten years should result in considerably higher valuation discounts (e.g., appraisers have estimated additional valuation discounts available in the range of 10% to 35%).
Nevertheless, while the new Nevada Restricted LLC and LP statutes provide a ceiling on valuation discounts, the entity’s underlying assets do not need to be locked in for the entire ten years. Instead, the attorney can include provisions that are not as restrictive and can lock in the assets for whatever period of time is preferred except for more than ten years (e.g., one year, six years, or nine years). However, taking this less restrictive approach comes with the cost of a lower valuation discount.
Finally, the Nevada Restricted LLC and Restricted LP statutes do not include a residency requirement. Therefore, Nevada residents and non-Nevada residents alike can benefit from these provisions and the higher valuation discount opportunity.
Please click on the below link to access Senate Bill 350. The language regarding Restricted LLCs is located in Sections 26 and 27, while the Restricted LP language can be found in Sections 38, 39 and 49.2.